Gold Boosted By China Inflation Uptick, More Short Covering
NEW YORK (July 9) Gold prices are higher in early U.S. trading Tuesday on inflation news out of China and some technical follow-through buying strength from Monday’s gains. More short covering and bargain hunting are featured. August gold was last up $14.00 at $1,248.90 an ounce. Spot gold was last quoted up $13.20 at $1,251.00. September Comex silver last traded up $0.082 at $19.12 an ounce.
Gold prices were boosted overnight on news that China’s inflation rate heated up a bit. China’s June consumer price index was up 2.7% on an annualized basis, compared to a 2.1% rate in May and above the consensus forecast for a 2.5% rise. Gold and other hard assets have traditionally been used as a hedge against inflationary price pressures. The China inflation news coincides with the recent surprisingly sharp rise in U.S. bond yields and home mortgage rates. While still not perceived by the world market place to be problematic, inflation is a phenomenon that creeps up and is not recognized as a serious problem until it already has a strong grip around the throats of major economies. Many market watchers have never been convinced that the past few years of the major central banks of the world printing money that such would not come back to produce a strong inflationary bite.
European stock markets rallied Tuesday on ideas of better upcoming corporate earnings reports. There also appeared to be at least a temporary easing of investor concerns about the political, financial and economic health of the sickly European Union countries Greece and Portugal. Meantime, Asian stocks were mostly higher Tuesday as traders and investors in that region shrugged off the China inflation data as non-problematic.
The civil unrest in Egypt is still a front-burner issue for the world market place. There were no major developments overnight, but the situation still has traders uneasy. The crisis in Egypt could quickly escalate and even spread to other countries in the Middle East. Gold has seen some safe-haven investor demand due to the recent political upset and violence in Egypt.
The market place is awaiting the Wednesday release of China’s latest trade report and the minutes of the last U.S. Federal Reserve FOMC meeting. These two data points are the most important economic readings of the week.
