Gold recovers after sluggish Chinese data puts pressure on Asian equities

Bengaluru — Gold prices recovered from a seven-month low on Monday, after sluggish GDP data from China weighed on Asian stocks and as the dollar traded below its recent highs.

Spot gold was up 0.2% at $1,243.36/oz at 3.45am GMT, after marking the lowest since December 12 at $1,236.58 on Friday.

US gold futures for August delivery were 0.2% higher at $1,243.40/oz.

The dollar seesawed against the Chinese yuan even as official data on Monday showed China’s GDP slowed in the second quarter as expected. Against a basket of six major currencies, the greenback traded below a 10-day peak.

A weaker dollar makes greenback denominated gold cheaper for holders of other currencies.

“The CNH [Chinese yuan traded offshore] is a bit stronger versus the dollar and that’s giving gold some support this morning,” a Hong Kong-based trader said.

The absence of increased rhetoric out of Beijing or Washington at the weekend probably gave the CNH a bit of reprieve, the trader said, adding that technically gold was under pressure and would still be sold on rallies towards $1,250.

Asian shares were lower on Monday after data pointed to slowing growth in the world’s second-largest economy, and as investors remained cautious over the effect of the heated China-US trade war.

Gold prices, which can gain in times of political uncertainty, have failed to benefit from the ongoing trade dispute.

“We remain disappointed by the way gold has been trading of late and do not see much upside potential here, but rather a steady grind lower given the relative strength in the dollar and fairly bouyant US equity markets,” INTL FCStone analyst Edward Meir said in a note.

The Federal Reserve on Friday pointed to “solid” US economic growth during the first half of the year in its semi-annual report to Congress, where it also reiterated that it expected to continue to raise interest rates gradually.

Higher US rates tend to boost the greenback and push bond yields up, weighing on non-interest bearing gold.

Meanwhile, investors are looking to June US retail sales data, due later in the day, to assess the state of global growth.

Spot gold might break a support at $1,237/oz and fall to the next support at $1,226, Reuters technicals analyst Wang Tao said.

Hedge funds and money managers cut their net long position in Comex gold contracts to a two-and-a-half-year low in the week to July 10, US data showed on Friday.

In other precious metals, silver was nearly unchanged at $15.85/oz, after hitting a seven-month low at $15.67 in the previous session.

Platinum climbed about 0.4% to $828.60/oz, while palladium was 0.4% higher at $940.47.

Reuters