Gold remains generally well bid, just below resistance at 1240.20/1242.07 amid rising global growth risks. The data out of Europe today were just dismal, escalating pressure on the ECB to launch QE.
Inflation in the eurozone is decelerating faster than expected. Deflationary risks are probably the ECB’s greatest concern, so the euro came under renewed selling pressure.
Eurozone industrial production fell 1.8% in August. German ZEW economic sentiment collapsed in October to -3.6, the first negative print in nearly two-years. The German government cut their growth outlook for 2014 to 1.2% from 1.8%. The 2015 forecast was slashed to 1.3% from 2.0%.
In the UK, BRK retail sales fell to -0.8% y/y. Same store sales tumbled to -2.1% y/y. CPI fell to 1.2%, well below the BoE’s target of 2%, and the lowest level in five-years.
The unwinding of BoE rate hike expectations, pushed Sterling to an eleven-month low, providing additional support to the dollar. Renewed firmness in the greenback is probably the only thing keeping gold from making a run at nearby resistance.
As growth risks mount, government bond yields have tumbled. German 10-year bund yields are back below 0.9%, near all-time lows. The 10-year UK Gilt yield hit a 16-month low of 2.18%. The U.S. 10-year Treasury yield fell to a new low for the year at 2.19%.
While The Wall Street Journal’s Fed watcher Jon Hilsenrath thinks the timing for the Fed’s rate ‘lift-off’ hasn’t changed much, the market seems to disagree. The age of easy money isn’t going to come to an end any time soon…if ever…