Gold prices may be supported by China’s growing appetite for bullion

The gold price stabilized near $1,617 per ounce Tuesday morning despite strength in the U.S. dollar and a better than expected U.S. economic report. Gold prices held in a tight range in overnight trading – between $1,613 and $1,624 – as the yellow metal continued to consolidate following last week’s rebound.  The price of gold subsequently showed a muted reaction to the ISM Services report for May, which at 53.7 came in modestly above the 53.4 consensus estimate among economists.

With its renewed strength, the gold price appears to have “regained its safe haven status,” according to analysts at Commerzbank.  In a report to clients, the firm wrote that “Gold has now successfully bounced off the major 1,532.20/1,522.48 support zone.  A minor retracement back to the 1,600 level is now on the cards but the next lower significant 1,532.20/1,522.48 support area should not be retested any time soon, though.”

Commerzbank went on to say that “We expect the precious metal to stay above its late May high at 1,584.20 on a daily closing basis in the course of this week and for it to head higher still in the near future.”
The gold price also received a tailwind from data out of China, which showed that imports of the yellow metal continued to rise.  HSBC contended that “Gold prices may be supported by China’s growing appetite for bullion, as imports from Hong Kong climbed to record highs.  Furthermore, imports of gold coins, which are reported in a separate category in the trade data, increased significantly to 1,876 kg in April from 5 kg in March.”

“The ability of China to sustain gold imports is impressive,” HSBC added, “considering that the economy is showing signs that growth is cooling and income growth is moderating.”

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