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Gold gains as weak China data weighs on risk appetite

Thu Nov 14 2019



Gold prices inched up on Thursday as Asian equities turned lower after weaker-than-expected economic data out of China weighed on risk appetite, boosting demand for safe-haven assets.


Spot gold was up 0.1 per cent at $1,464.31 per ounce, as of 0401 GMT, while US gold futures rose 0.1 per cent to $1,464.80 per ounce.


Asian stocks fell after China's industrial output grew significantly slower than expected in October, as weakness in global and domestic demand and the drawn-out Sino-US trade war weighed on activity in the world's second-largest economy.


"Gold is being supported as the Chinese industrial production and retail sales came way below expectations," OANDA analyst Jeffrey Halley said.


"Another deterioration in Hong Kong this week will further support gold, but it's really all about this ongoing trade talks, which is becoming like a broken record."


Dialling up the trade rhetoric, US President Donald Trump on Wednesday threatened to ramp up tariffs on Chinese goods if the countries failed to reach a deal on trade.


That came after media said the US-China trade negotiations had 'hit a snag' over farm purchases, with China not wanting a deal that looked one-sided in favour of the United States.


US Federal Reserve Chair Jerome Powell on Wednesday told the Joint Economic Committee that negative interest rates sought by Trump are not appropriate for the US economy right now.


He also added that the central bank would probably stop (with interest rate cuts) where it is unless there is a "material" change in the economic outlook.


"Investors are stuck with rising trade tensions with Trump threatening additional tariffs again, but what's weighing on gold is the hawkish stance from the Fed overnight, saying rate cuts are on hold for now," ANZ analyst Daniel Hynes said.


"In the long term, the backdrop is pretty conducive. With the global central banks being accommodative, gold will get its support."


The Fed has cut interest rates thrice this year to help sustain US growth. A lower interest rate reduces the opportunity cost for holding the non-yielding bullion.


Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust fell 0.04 per cent to 896.77 tonnes on Wednesday.


Elsewhere, palladium climbed 0.4 per cent to $1,716.63 per ounce. Silver was down 0.1 per cent at $16.95 per ounce and platinum dipped 0.1 per cent to $872.90 per ounce.


Source: Reuters

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