Gold loses sheen: Yellow metal at near 4-month low as China GDP fuels risk

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Published: April 17, 2019 11:46:40 AM

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.

U.S. gold futures were up 0.2 percent to ,278.80 an ounce.

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 were up 0.1 percent at $1,277.32 per ounce as of 0513 GMT, after having fallen as much as 1.2 percent to $1,272.70, its lowest since Dec. 27, in the previous session.

U.S. gold futures were up 0.2 percent to $1,278.80 an ounce. China’s pace of economic growth in the first quarter remained steady at 6.4 percent, beating expectations of a growth rate of 6.3 percent, helped by a sharply higher factory production.

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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 percent 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 U.S.-China trade negotiations and strong U.S. economic data have further bolstered risk appetites since the start of the second quarter,” Phillip Futures analyst Benjamin Lu 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 0.4 percent to $15.03 an ounce. Spot platinum rose 0.6 percent, to $881.56 per ounce, while palladium also climbed 0.6 percent to $1,357.20. The recent weakness in palladium prices was instigated by a conjunction of profit-taking and poor car sales data in China and the U.S., 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.

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