Gold fell on Wednesday, pressured by a stronger dollar, but remained close to six-week high levels, underpinned by strong physical demand from world No2 consumer India. Copper extended overnight gains on hopes for fresh monetary stimulus in Europe and China amid fears of a global economic slowdown.
Comex gold for delivery in December traded at $1 244.0 per troy ounce at 12:46 GMT, down 0.62% on the day. Prices varied in a daily range of $1 250.2-$1 242.0. The precious metal surged to a six-week peak of $1 255.6 on Tuesday and settled the day 0.56% higher at $1 251.7, the highest since September 8th.
Gold drew support by heightened physical demand from India, the world’s second-biggest consumer. The Asian country celebrated Dhanteras, the biggest gold-buying festival, yesterday, while Diwali, the festival of lights, is celebrated on October 23rd. According to estimates by the All India Gems & Jewellery Trade Federation, India’s gold imports probably jumped to 95 tons last months from 15-20 tons a year earlier.
The metal also remained supported by worries the global economy is slowing after China reported an annualized 7.3% Q3 GDP growth, below the officially targeted 7.5% expansion rate. Although the reading beat analysts’ projections for a drop to 7.2%, it still prompted speculations the government must introduce additional stimulus measures to safeguard its growth aim and prevent a sharper drop in activity.
The metal rebounded from the lowest level this year hit in early-October after US policy makers voiced their concern that a stalling global economy and a stronger dollar may impede the US economy’s recovery, and kept an overall dovish tone at FOMC’s September meeting.
US data
However, despite the recent ambivalence regarding Fed’s timetable to raise interest rates, long-term sentiment toward gold remained bearish. Policy makers are broadly expected to end Fed’s Quantitative Easing program at their October 28-29 meeting, supported by last week’s upbeat economic data, while an interest rate hike is anticipated to come at some point in 2015.
Last week’s upbeat industrial production, initial jobless claims and housing starts in the US, coupled with yesterday’s better-than-expected September existing homes sales fueled confidence among investors the US economic recovery remains robust and on track.
On Wednesday, the Labor Department reported that US consumer prices rose marginally in September as energy costs fell, keeping inflation muted and giving the Fed more room for rock-bottom interest rates.
Consumer prices inched up 0.1% in September after falling 0.2% in August, while marking a slightly better-than-expected 1.7% rise on annual basis. Stripping out volatile food and energy costs, the so-called Core CPI registered at 0.1%, less than economists forecast for 0.2%, while meeting projections for an annualized 1.7% jump, the same as in August. The Federal Reserve targets 2% inflation and tracks an index that runs even lower than the consumer price index.
The US dollar index, which measures the greenback’s performance against a basket of six major peers, rose to a 1-week high on Wednesday. The December contract stood at 85.765 at 12:46 GMT, up 0.42% on the day, having risen to 85.795 earlier in the session, the highest since October 15th. The US currency gauge rose 0.43% on Tuesday to 85.404, the highest settlement in over a week.
Assets in the SPDR Gold Trust, the biggest bullion-backed ETP and a proxy for investor sentiment towards gold, remained unchanged on Tuesday after they fell 1.18% to 751.96 tons on Monday, the lowest since November 2008.
Copper
Copper rose to a one-week high on Wednesday amid investor hope for fresh stimulus measures in Europe and China, the worlds biggest consumer of the metal. Market players eyed tomorrows preliminary manufacturing data from the Asian country for October.
Comex copper for delivery in December rose by 0.21% to trade at $3.0345 per pound at 12:46 GMT, having shifted between $3.0450, a one-week high, and $3.0135 during the day. The industrial metal added 1.34% on Tuesday to settle at $3.0280, the highest since October 14th.
Copper gained ground after Chinas National Bureau of Statistics reported that the Asian economy grew by an annualized 7.3% in the third quarter, compared to 7.5% in the preceding period. Although the reading beat broad analyst expectations for a slowdown to 7.2%, it still sparked expectations the government will introduce additional stimulus measures to spur growth.
Meanwhile, China’s industrial production expanded by 8.0% in September from a year earlier, exceeding analysts’ projections for a 7.5% growth from the preceding month’s 6.9% annualized expansion which was the slowest in more than five years.
The Chinese economy has been dragged by a slowdown in its property sector which is a key source of demand for base metals. The national statistics agency reported that total investment in real estate development in the first nine months of 2014 rose by an annualized 12.5%, down 0.7% compared to the first eight months. Investment in residential buildings was up 11.3%, 1.1% lower, and accounted for 68.0% of real estate development investment.
The property sector in the US, on the other hand, seemed to be faring much better. The Commerce Department reported last week that housing starts jumped in September by 6.3% on a monthly basis, reversing a 12.8% contraction in the previous month.
Meanwhile, data yesterday showed that home resales (existing home sales) surged to the highest in a year in September, having registered at 5.17 million units with a 2.4% monthly jump.
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