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Gold Edges Up After 2-Day Decline, China Concerns Support

Spot gold firmed 0.2 per cent to $1,095.6 an ounce by 0037 GMT, while US gold futures eased 0.1 per cent to $1,095.2.
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Gold Edges Up After 2-Day Decline, China Concerns Support
Singapore: 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.

Fundamentals

* Spot gold firmed 0.2 per cent to $1,095.6 an ounce by 0037 GMT, while US gold futures eased 0.1 per cent to $1,095.2.

* China's main stock indexes each dropped more than 5 per cent 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 US 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 US 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 per cent on Friday, data from the fund showed.
 

© Thomson Reuters 2016



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