Gold Slips Dollar Rises After China Data

August 10, 2012 at 12:40

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Gold inched down on Friday as the U.S. dollar rose following the release of weak economic data from China, but the metal remained on track for a weekly gain, bolstered by hopes China could move to stimulate growth.

Asian shares and other financial markets weakened on Friday after China’s July trade data fell far short of expectations, but downbeat Chinese economic figures have kept hopes alive that Beijing will do more to bolster growth.

“Gold is trading broadly in line with other asset classes this morning as you see disappointment in the Chinese data, and that flows into the U.S. dollar,” Credit Suiss eanalyst Tom Kendall said.

The dollar rose against the euro and against a basket of currencies. A stronger U.S. currency makes dollar-priced commodities such as gold costlier for holders of other units.

The next major event for the gold market is likely to be the annual meeting of economists and central bankers in Jackson Hole, Wyoming.

“Now the market will begin to look forward to and anticipate what will be said at the Jackson Hole conference at the end of August and then what the FOMC may or may not decide at its September meeting,” Kendall added.

Uncertainty over whether the FED and ECB will take further steps to boost their economies has so far deterred a stronger move in gold prices, and bullion remains below last September’s record high at around $1,920 an ounce.

Should the Fed signal it intends to implement a third round of monetary easing at the next meeting, it would probably boost precious metals, which are seen as a hedge against inflation.

Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, said investors were also looking for China to reduce banks’ reserve requirements and pump more money into the market.

Markets also have been pinning hopes on the possibility the ECB will start buying sovereign bonds to lower borrowing costs for Spain.

Analysts said there have been no signs of improvement in physical demand from India, a major market for gold, but they expected things could improve in the second half of August.

“The market is a bit mixed,” Leung said. “On the physical side, there are people buying a small amount of gold, but on other hand, some are taking profits.”