Gold prices edge up after 2-day decline, China concerns support

By: | Published: January 12, 2016 8:00 AM

Spot gold edged higher on Tuesday, snapping two sessions of decline, as concerns over China's economic growth and pressure on stock markets lifted the precious metal.

GOLDThe gain in gold prices is likely to be capped by concerns that higher U.S. interest rates would lower demand for the non-interest-paying asset, while boosting the dollar. The Fed raised rates in December and attention has shifted to how many hikes will follow in 2016. (AP)

Spot gold edged higher on Tuesday, snapping two sessions of decline, as concerns over China’s economic growth and pressure on stock markets lifted the precious metal.

Spot gold firmed 0.2 percent to $1,095.6 an ounce by 0037 GMT, while U.S. gold futures eased 0.1 percent to $1,095.2.

China’s main stock indexes each dropped more than 5 percent on Monday. Oil prices fell to new 12-year lows, as concerns over China hurt commodity prices broadly.

Right from the beginning of 2016, markets have been rocked by plunges in Chinese stocks, the yuan’s fall and subsequent heavy intervention by the Chinese authorities.

The chaotic moves have led to worries China’s economy may be in for tough time rather than stabilising as some had hoped.

China is the world’s biggest consumer of gold at around 1,000 tonnes a year.

The yellow metal is often seen as an alternative investment during times of financial uncertainty, although safe-haven rallies tend to be short-lived.

The gain in gold prices is likely to be capped by concerns that higher U.S. interest rates would lower demand for the non-interest-paying asset, while boosting the dollar. The Fed raised rates in December and attention has shifted to how many hikes will follow in 2016.

Atlanta Federal Reserve Bank President Dennis Lockhart said there may not be enough fresh data on inflation to support another U.S. interest rate hike by March.

Holdings of the world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 0.69 percent on Friday, data from the fund showed.

 

 

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