Nigeria’s inflation falls slightly in March; Gold edges lower

Gold remains protected by concerns over slowing global growth, Brexit, geopolitical risks and a dovish Federal Reserve

In a favourable development, Nigeria’s inflation has eased to 11.25% in March from 11.31% in February, despite speculation of increased government spending stoking inflationary pressures.

With consumer prices moderating closer towards the Central Bank of Nigeria’s target band of 6%-9%, this may open the doors for the central bank to make a move in the future. While it remains premature to speculate on the possibility of another rate cut occurring anytime soon following the surprise move in March, repeated signs of easing inflationary pressures could prompt the CBN to cut rates again during the second half of 2019.

PBoC to ease on stimulus?

The People’s Bank of China is singing a different tune compared to the dovish tones coming from major central banks around the world. The PBoC released a statement from its April 12 meeting, saying the Chinese economy “has shown healthy development and economic growth is resilient”.

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Such rhetoric frames the expectations surrounding Wednesday’s release of China’s Q1 GDP, industrial output, and retail sales data, as the Yuan remains steady against the US Dollar around the 6.71 handle at the time of writing.

However, markets are also interpreting this confident outlook as reason for the PBoC to withhold more stimulus; the PBoC has previously said it would not “flood” the economy with excessive liquidity. With market sentiment perhaps over-reliant on the potential for more stimulus measures, equity markets have indulged in some profit-taking, with the Shanghai Composite Index some 100 points off its highest level since March 2018.

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Gold to test $1,280 support level … again

Gold is on course for testing the $1,280 support level yet again, as the resilient US Dollar makes it harder for the precious metal to hang on to gains.

Broadly, global risk sentiment has been supported by China showing signs of stabilizing and hopes that the US-China trade saga will conclude with a breakthrough deal. However, with the ECB and the IMF warning that risks remain tilted to the downside, markets do not yet have the all-clear for charging into a risk-on side. This alone should provide support for Gold prices at the $1280 floor.

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Focusing on the medium to longer-term outlook, Gold remains protected by concerns over slowing global growth, Brexit, geopolitical risks and a dovish Federal Reserve. As long as these themes remain present, the metal still has ample upside potential.

The views expressed in this piece are the author’s own and do not necessarily reflect News Central’s editorial stance.

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