Gold Up As Global Economic Concerns Rise; Weak Empire State

Gold and Silver are trading higher on Friday as investors have concerns about a possible global economic slowdown spreads to the United States. Today US data is critical.

A weak dollar is also another factor fueling precious metals. A possible slowdown in the US would force the Fed to pause its hike rate path, pushing dollar down.

Global economic concerns fuels risk aversion

During its monetary policy decision earlier in the Asian session, the Bank of Japan delivered a dovish stance.

Nothing new, but it revised its expectations on exports and output. BoJ said that overseas economies are showing signs of a slowdown.

Deutsche Bank’s analysts highlighted in a recent note that “the BoJ said that Japan’s economy continued to expand moderately. But the global slowdown had caused ‘some weakness’ recently in exports and industrial production.”

Japan’s worries about the global economy could signal a spreading of global slowdown into the Japanese economy. Altogether with European economic slowdown and possible China problems could be sufficient to affect the United Stated performance.

That is why today’s economic data is key, as well as next week reports.

The University of Michigan will release its preliminary Consumer Sentiment Index today. As Rabobank suggests in a recent article, January number was surprisingly weak, but it showed a modest rebound in February.

So, “with the consensus looking for both indicators to show further improvement in March,” Rabobank says. “It is basically saying that the US economy is still going pretty strong and that the recent dip was likely transitory.”

Here, a weaker than expected Michigan Consumer Sentiment data, plus the Empire State Index showing poor performance in March, would fuel concerns about the United States economic healthy.

The New York Empire State manufacturing index declined to 3.7 in March, an unexpected decline from February reading of 8.8. Market expected an increase to 10.0.

In this framework, the Fed would be forced to maintain its pause on the interest rate hiking path. Which would push the dollar under pressure.

As FX Empire Analyst James Hyerczyk said in a recent forecast report, “Gold tends to rally when rates are kept low.”

Gold recovers ground on Friday and hints a weekly positive candle

Gold is trading positive on the last day of the week as investors are looking for safer assets amid global economic concerns.

XAU/USD is currently trading at 1,303, 0.54% positive on the day with the pair recovering the 1,300 area and testing the now the 50-day moving average level at 1,303.

Next frontier would be the 20-day moving average at 1,310, that acted as resistance the last two sessions.

A brick above that level would open the doors for a 1,330 test and then the 1,3050 area.

Gold is ready to close its second positive week in a row. However, the weekly candle is, for now, a spinning top candle that would extend gains signaled by the bullish hammer developed the previous week.

Silver rallies on Friday and recovers the 15.30 area

Silver is trading positive on Friday as investors are looking for safer haven assets.

XAG/USD is currently pricing at 15.35, 1.07% positive on the day as the pair recovered almost all losses suffered on Thursday.

The pair is now testing the 15.40 level just ahead of the 15.50-60 critical area, where 20 and 50 days moving averages are.