Gold supported after US dollar retreats

The spot gold price inched higher during Asian trading hours on Wednesday, October 19, after the US dollar softened.

Spot gold was last at $1,262.70-1,263.80 per ounce, up $0.55 from Tuesday’s close. Trading ranged at $1,262.15-1,262.15 so far on Wednesday.

After hitting a seven-month high of 98.17 on Monday, the US dollar index has softened due to weak US economic data. It was recently at 97.82, down 0.05% from Tuesday’s close.

Lacklustre economic data from the US on Monday had prompted speculation the Fed will need to maintain accommodative policy – the data follows comments from Federal Reserve chair Janet Yellen highlighting the potential benefits of temporarily running a ‘high-pressure economy’ to stimulate business investment and jobs growth, James Moore, a research analyst at Metal Bulletin, said.

This suggests the Fed will continue to maintain a loose policy stance even if inflation exceeds its 2% target, he noted.

While dips below $1,250 had proven very short-lived, stronger gold prices may be viewed as a selling opportunity, he said.

“We wouldn’t rule out a correction back towards $1,180-1,220, with a December rate rise still in play,” he added.

The gold market will be subject to some nervousness in the fourth quarter of this year due to growing investor fears about the Federal Reserve raising rates in December, Sucden said.

It expects gold prices to trade in a range of $1,230-1,420 over the fourth quarter of the year – the uptrend that started late in 2015 is set to continue over 2017.

In data released this morning, China’s third quarter GDP growth came in at 6.7% year-on-year, in line with expectations and at the same level as that in the second quarter.

Industrial production growth in September was, however, below expectations at 6.1% – 6.4% was called for while August’s reading was at 6.3%.

Fixed asset investment in January-September increased 8.2%, which was within market expectations and slightly higher than January-August’s 8.1% growth.

Retail sales growth in September was at 10.7%, which was also in line with consensus and slightly higher than the 10.6% growth registered in August.

The Chinese economy remained stable in the first three quarters of this year, the National Bureau of Statistics said in a statement on Wednesday.

The foundation for the continued development of the Chinese economy is not solid, however, given that the economy remains in transition and there are still many uncertainties in the domestic and global economies, the Bureau cautioned.

China is shifting away from metal-intensive infrastructure projects towards a more service-oriented economy as it hopes to count on the latter to drive its economy.

In data released Tuesday, the US CPI month-over-month was in-line with expectations at 0.3%, while core CPI over the same period ticked up 0.1%, a touch off the 0.2% projection.

Chinese M2 money supply disappointed at 11.5% but new loans were better than expected at 1.220 trillion yuan.

Key US economic data due later today includes building permits, housing starts and crude oil inventories.

In currencies, the US dollar index fell 0.07% to 97.81 so far on Wednesday.

In other commodities, the Brent crude oil spot price decreased 0.02% to $52.08 per barrel, and the Texas light sweet crude oil spot price slipped 0.14% $50.70 recently on Wednesday.

In equities, the Shanghai Composite rose 0.07% to 3,085.94 so far today.

In other precious metals, silver was last at $17.625/17.645, up $0.03. Platinum rose $2 to $942/948, and palladium increased $5.50 to $639/646 recently on Wednesday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 275.60 yuan per gram, and the December silver was flat at 4,031 yuan per kilogram.

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