Gold prices gain due to weak Eurozone data
On March 22, gold prices (NUGT) have been gaining due to safe-haven bids led by weaker-than-expected economic data from the Eurozone (HEDJ). The data showed a steep drop in manufacturing activity in Europe (EZU). The preliminary manufacturing activity in the Eurozone fell to 47.7 from 49.4 in February—the lowest level since 2013. The flash PMI for Germany (EWG) was particularly weak.
Investors flee to safe-haven assets
Since investors sought refuge in bonds after European stock markets came under pressure, the yield on Germany’s ten-year government bonds fell into the negative territory. While markets were already concerned about the slowing global growth led by Europe and China (FXI), the current set of data makes the concerns worse. As reported by IHS Markit, “Forward-looking indicators such as business optimism and backlogs of work, therefore, suggest that growth could be even weaker in the second quarter.”
The latest set of weak data from the Eurozone led to a risk-off sentiment, which weighed negatively on stock markets. At 11:00 AM EST on March 22, the S&P 500 Index (SPY), the Dow Jones Industrial Average Index (DIA), and the NASDAQ Composite (QQQ) fell 1.02%, 1.02%, and 1.16%, respectively. Nike (NKE) is one of the leading major market losses with a fall of 4.9%. Nike’s North American sales fell short of market expectations. Boeing (BA) fell 1.9%. The SPDR Gold Shares (GLD) rose 0.4% due to the risk-off sentiment.
Other factors are fueling the stock market concerns and gold’s rise, which we’ll discuss in the next part.