Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and the Cracks in the U.S., Japan and Germany’s Economic Data

Commodities / Gold & Silver 2019 Aug 21, 2019 - 04:30 PM GMT

By: Arkadiusz_Sieron

Commodities

Talk of a synchronized world - all three economic superpowers are in a recession! The U.S. suffers from industrial recession, Japan from export recession, while Germany may fall into a broad economic recession. Will the gold market warm up to these news?

Recent U.S. Data Shows Industrial Recession

The recent inversion of the yield curve has sparked recessionary fears. Some of the newest pieces of the U.S. economic data confirm the gloomy outlook. For example, the industrial production fell 0.2 percent in July, the second drop in the past four months, according to the Federal Reserve, as one can see in the chart below. Although the scale of slump might be overstated due to the Hurricane Barry hitting oil production in the Gulf of Mexico, the industrial sector remains in a technical recession.


However, other recent economic reports have been more positive. The retail sales surged 0.7 percent in July, beating expectations. As the chart below shows, there is also an improvement on an annual basis. What is more, when omitting auto dealers and gasoline stations, retail sales scored an even stronger gain of 0.9 percent last month.

Chart 1: Annual percentage change in the US industrial production (green line) and the retail sales (red line) from January 2010 to July 2019. 

Moreover, the CPI increased 0.3 percent in July after rising 0.1 percent in June, according to the BLS. The core CPI also rose 0.3 percent, the same increase as in June. On an annual basis, the overall inflation rate jumped 1.8 percent, an acceleration from 1.6-percent change in June, while the core CPI rose 2.2 percent over the last 12 months, slightly more than the 2.1-percent increase for the period ending June, as the chart below shows.

Chart 2: Annual percentage change in the US CPI (green line) and the core CPI (red line) from January 2015 to July 2019.

Although higher inflation is not good news for the consumers, it can soothe the nerves of doves among the FOMC and all those believing that subdued inflation is something bad for the economy. However, the markets still expect two more interest rate cuts this year - the modest acceleration in inflation notwithstanding. It’s the best fundamental combo for gold: higher inflation but still dovish Fed.

Japanese and German Exports Suffers

Although the factory sector is in technical recession, the U.S. economy looks on a much more solid footing than Japan or the Eurozone does. In the Land of the Rising Sun, the exports fell 1.6% from a year earlier, marking eighth decline in a row. At the same time, manufacturers’ confidence turned negative for the first time in over six years

When it comes to Germany, the Eurozone’s economic powerhouse, it might be already in recession. The GDP fell 0.1 percent in the second quarter of 2019. To make matters worse, the Bundesbank said on Monday that the German economy could have continued to shrink over the summer. The downturn stems from the weak industrial production amid a dearth of orders. The trade wars finally hit both export-focused economies. Although the services sector should provide the support for Germany (and Japan), there are some signs that the industrial downturn will be felt in the labor market.

Given that slump and the fact that inflation in the Eurozone is now running at 1 percent, the European Central Bank could decide in September on further stimulus, perhaps even bigger than expected. It should weaken both the euro and gold against the U.S. dollar. However, it can also increase the safe-haven demand for gold, if the ECB’s action scares European investors.

Implications for Gold

What does it all mean for the gold market? On the other hand, the U.S. remains in much better shape than Japan or the Eurozone. This should support the U.S. dollar, creating downward pressure on the gold prices. On the other hand, the global slowdown may eventually spread into the U.S. one day. When the recession arrives to the States – and the yield curve inversions suggests that it is only a matter of time – gold should shine.

If you enjoyed the above analysis, we invite you to check out our other services. We provide detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in