Gold Rises 1.5% as Chinese Inflation Ticks Up
LONDON (July 9) Precious metals built on the previous session's gains after signs of higher inflation in major consumer China emerged on Tuesday.
In London, spot gold soared to just short of a two-week high at $1,260.90 per ounce, and it was last still near this level at $1,256.80/1,257.60 per ounce, up $20.70 or more than one and a half percent on the previous close.
Silver was also firmer, the metal gained a similar amount in percentage terms, 1.6 percent or 32 cents to $19.37/19.42 per ounce.
Analysts said today's bounce was probably precipitated by an unexpected bounce in the June Chinese consumer price index, which came in at 2.7 percent, up from 2.1 percent in May. The country's producer price index, meanwhile, fell by 2.7 percent, a 0.2 percentage point smaller decrease than in May.
"Generally the metals are attempting to rebound and we feel they are well placed to rechallenge recent resistance levels," FastMarkets analyst William Adams said. "For now we would look for prices to work higher again, there is still a risk of short-covering, even more so now that support was tested and held, but as we have said before, we would not get too comfortable with the rebounds."
"We are not expecting any stimulus measures from China and today’s higher than expected CPI reading supports that view," he added.
In other data released this morning, May UK manufacturing production fell by 0.8 percent, a 0.6 percent larger decline than in April.
For the rest of the day, the data calendar is relatively quiet, but the pace picks up again with the June Chinese trade balance data tomorrow morning and the University of Michigan US consumer sentiment index on Friday.
In other gold market news, the unprecedented haemorrhaging of exchange traded gold continues, with funds tracked by FastMarkets shrinking by 15.7 tonnes to 2,015.49 tonnes yesterday. This is down from all-time highs of 2,641.5 tonnes late last year.
"For as long as ETF outflows continue on this scale, no sustainable price recovery is likely," Commerzbank said. "Money managers are also retreating further from the gold market: in the week to 2 July, they slashed their net long positions by 29 percent to 21.4 thousand contracts, putting them at their lowest level since October 2006."
A downtick in the dollar supported gold this morning. Having climbed as high as $1.2803 against the euro on Friday, it was last at $1.287.
In equities, indices are generally steadier. The FTSE 100 was last up about 1.1 percent at 6,524 and the German Dax added a similar amount to 8,060.
TENTATIVE PGM GAINS AS AMPLATS STRIKE PETERS OUT
Palladium climbed to a three-week high and platinum to a one-week peak as production concerns took hold, following a one-day strike in major producer South Africa.
Palladium was last still near the intraday high of $705 at $699/704 per ounce, up $7 on yesterday's close. Platinum gained $12 to $1,366/1,376, having been as high as $1,380 per ounce.
The metals were buoyed by a one-day wildcat strike at top producer Anglo American Platinum.
Yesterday, about 5,600 employees at the company's Thembelani and Kuseleka mines in Rustenburg went on an unprotected strike. But today, the company said that workers returned.
The risk of contagion across South African platinum mines is very high, as significant production is concentrated in a tiny geographic area - which in turn has wide implications for the platinum market, as about three quarters of world production takes place in this country.
