Gold price declined after disappointing report on Chinese GDP and a stronger U.S. dollar

The gold price declined $10.04, or 0.6%, to $1,665.85 per ounce Friday morning amid a disappointing report on Chinese GDP and a stronger U.S. dollar.  The spot price of gold held in a narrow range between roughly $1,670 and $1,680 in overnight trading, but turned modestly lower as the U.S. Dollar Index rose 0.7% to 79.798 against a basket of foreign currencies.

China’s first quarter GDP report was the primary catalyst for the markets’ weakness, however.  At 8.1%, the Chinese economy grew at a slower pace than the 8.3% rate economists were expecting, and marked the lowest growth rate in 11 quarters.  The disappointing report led to broad-based selling in stocks and commodities, following two straight days of gains.

As for the price of gold, Standard Bank analyst Walter de Wet wrote in a note to clients that “Especially in the United States, the investment climate is very neutral towards gold at this stage. People really need to see a policy catalyst before they come back aggressively.”

“On the physical side, from the end of this month there is really no seasonal demand coming until August,” de Wet asserted. “It is going to be difficult to break much higher if we don’t have this physical buying supporting any investment demand coming through for the next two or three months.

Credit Suisse analyst Tom Kendall offered a similar, albeit somewhat more constructive outlook on the gold price in a recent commentary.  “It’s a market that is more or less being pinned in dollar terms to the $1,650 level for a while,” he contended.  “The next move, I suspect, is going to be higher, but the market is fairly susceptible to headlines at the moment.”

“Volumes are very thin, by and large,” Kendall added, “and the key really from here is for something to give gold a push up through $1,675/1,680 and above there, you would start to see some more activity.”

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also wai...
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad ...
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the...
Read more