Gold & Silver

Gold near 4-month low as China GDP fuels risk sentiment

Reuters April 17 | Updated on April 17, 2019 Published on April 17, 2019

SPDR Gold holdings fall to near six-month lows.   -  Reuters

Gold has fallen by over 5 per cent from February high

Gold prices stayed below the key $1,280 level on Wednesday, near a four-month trough, as better-than-expected economic readings from China lifted Asian shares and sharpened risk appetite, denting the metal's safe-haven appeal.

Spot gold was steady at $1,276.36 per ounce as of 0324 GMT, after having fallen as much as 1.2 per cent to $1,272.70, its lowest since December 27, in the previous session. US gold futures were up 0.1 per cent to $1,278.80 an ounce.

China's pace of economic growth in the first quarter remained steady at 6.4 per cent, beating expectations of a growth rate of 6.3 per cent, helped by a sharply higher factory production. The data, which signalled that Beijing's recent stimulus drive might be paying off, swung Asian shares higher. “With the (Chinese) data that we've got, it certainly adds a bit of a downside to gold from here,” said IG Markets analyst Kyle Rodda. “The fact that we have broken below the key $1,280 level might make it difficult for prices to recover.”

The metal has fallen by over 5 per cent since its February high of $1,346.73 an ounce and is trading below its 50 and 100-day moving averages, which, analysts say is a sign of further weakness. “Signs of progress in US-China trade negotiations and strong US economic data have further bolstered risk appetites since the start of the second quarter,” Phillip Futures said in a note. “The precious metal looks poised to undergo a bearish correction amidst growing downside risks in the near term,” the note added.

Gold, a non-yielding asset for investors looking to hedge against times of economic and political uncertainty, loses appeal when interest-yielding equities rise. A gauge of investors' interest in the metal, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell to a near six-month low to 752.27 tonnes on Tuesday.

Elsewhere, silver gained 0.2 per cent to $15 an ounce. Spot platinum rose 0.3 per cent, to $879.50 per ounce, while palladium climbed 0.4 per cent to $1,355.46. The recent weakness in palladium prices was instigated by a conjunction of profit-taking and poor car sales data in China and the US, Metals Focus said in a note on Tuesday.

However, analysts at Standard Chartered expect supply deficit which had earlier pushed the metal to a record high of $1,620.53 last month, to deepen through this year and in 2020.

Published on April 17, 2019
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