Gold loses ground as Chinese data whets investors’ appetite for risk

Bengaluru — Gold prices slipped on Monday, consolidating above the key $1,400 pivot, as key China data assuaged concerns about global economic slowdown and boosted appetite for riskier assets.

Spot gold was down 0.3% at $1,410.73 per ounce in morning trading.

US gold futures were up 0.1% at $1,413 an ounce.

China’s June industrial output climbed 6.3% from a year earlier, beating a 5.2% forecast, while January-June fixed-asset investment rose 5.8% from the same period in 2018, surpassing a 5.5% increase forecast by analysts.

“Better-than-expected economic data from China just erodes concerns that the global slowdown is not as deep as expected, therefore causing some profit-taking in gold,” said Howie Lee, an economist at OCBC Bank.

Meanwhile, China’s economic growth slowed to 6.2% in the second quarter from a year earlier, the weakest pace in at least 27 years.

“The overall growth picture still looks weak. [Due to further] tensions around [US-China] trade talks and geopolitical concerns in the Middle East, the need for gold as a hedge still remains strong,” he added.

“Retail sales and industrial production data that came in at higher levels suggest that the economy is in better shape and that means less potential for stimulus from the officials in China,” said Michael McCarthy, chief market strategist at CMC Markets.

Denting bullion’s appeal, Asian shares advanced on Monday as encouraging Chinese data suggested the world’s second-biggest economy may be starting to stabilise due to ramped-up stimulus from Beijing.

Also weighing on gold prices, the dollar index inched higher on Monday against a basket of major currencies.

However, the dollar index fell for three consecutive sessions on prospects of an interest rate cut by the US Federal Reserve later in July.

“The next big event for gold is the Federal Open Market Committee meeting at the end of this month, as expectations fluctuate between a quarter percent cut and a half percent cut. We should see that have an impact on gold prices,” McCarthy said.

Meanwhile, hedge funds and money managers cut their bullish stance in Comex gold in the week ended July 9, the US Commodity Futures Trading Commission (CFTC) said in a report on Friday.

On the technical side, spot gold looks neutral in a narrow range of $1,404-$1,421 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver fell 0.1% to $15.19 per ounce.

Platinum gained 0.7% to $832.74 an ounce and palladium rose 0.5% to $1,553.20 per ounce. 

Reuters