Gold futures rebounded to settle higher Tuesday mostly on some bargain hunting, after the precious metal tumbled to a more than 2-year low yesterday. Gold has been under pressure after three major analysts slashed its price forecast, coupled with the debt crisis in eurozone as reports indicated Cyprus is likely to sell gold from its reserve to fund its portion of the bailout deal. Gold also found support in a dollar that weakened against some major currencies. A weaker dollar tends to spur buying in dollar-priced commodities, making it cheaper for holders of other currencies. Nevertheless, gold came off its session high on a slew of positive macroeconomic data from the U.S.
Gold for June delivery, the most actively traded contract, gained $26.30 or 1.9 percent to close at $1,387.40 an ounce Tuesday on the Comex division of the New York Mercantile Exchange.
Gold for June delivery scaled an intraday high of $1,404.20 and a low of $1321.50 an ounce.
The precious metal plummeted to a more than 2-year low on Monday, on some soft economic data out of China, indicative of a slowdown in the world’s second largest economy, recording its worst one-day plunge since 1980s and the lowest settlement since February 2011. The dollar index, which tracks the U.S. unit against six major currencies, traded at 81.79 on Tuesday, down from 82.32 late Monday in North American trade. The dollar scaled a high of 82.32 intraday and a low of 81.78.
The euro traded higher against the dollar at $1.3191 on Tuesday, as compared to $1.3036 late Monday in North America. The euro scaled a high of $1.3192 intraday and a low of $1.3030.
In economic news, a U.S. Federal Reserve report on Tuesday showed a bigger than expected increase in U.S. industrial production in March. Industrial production rose 0.4 percent in March following an upwardly revised 1.1 percent increase in February. Economists expected production to edge up by 0.2 percent.
Consumer prices in the U.S. unexpectedly showed a modest decrease in March, a report from the Labor Department on Tuesday showed, with the drop largely due to a sharp decrease in energy prices. The consumer price index edged down by 0.2 percent in March after rising by 0.7 percent in February. Economists expected prices to come in unchanged compared to the previous month. With new construction of multi-family homes showing a substantial increase, the U.S. Commerce Department’s report on Tuesday showed housing starts in the country increased much more than anticipated in March. The housing starts jumped 7.0 percent to an annual rate of 1.036 million in March from the revised February estimate of 968,000. Economists expected housing starts to climb to an annual rate of 930,000 from the 917,000 originally reported for the previous month. With this jump, housing starts is at its highest level since June 2008.
Elsewhere, U.K. inflation remained steady, above the 2 percent target in March, squeezing the purchasing power of consumers. Nonetheless, pipeline inflation decreased significantly in March, adding to hopes of more stimulus from the central bank after the government broadened its capacity to increase easing even when inflation is above the target. Annual inflation stayed at 2.8 percent in March, data from the Office for National Statistics showed Tuesday, which was in line with expectations.
From the eurozone, Germany’s investor confidence deteriorated at a faster-than-expected pace in April from March’s three-year high, signaling that recovery in Europe’s largest economy is losing momentum. The ZEW investor confidence index dropped to 36.3 points in April from 48.5 points in March, a survey by the Center for European Economic Research/ZEW showed. The decline followed four months of successive increases. Economists anticipated a reading of 41 points for April.
The International Monetary Fund on Tuesday trimmed its growth projections for the global economy as it sees a three-speed recovery evolving, due mainly to the diverging paths of the U.S. and the euro area. In its semi-annual World Economic Outlook, the Washington-based lender cut the global growth forecast for this year to 3.3 percent from 3.5 percent predicted in January. The growth forecast for 2014 was slashed to 4 percent from 4.1 percent expansion seen earlier. Moody’s Investors Service downgraded China’s credit outlook to stable from positive as the economy made less progress in reducing risks associated with local government debt and rapid credit growth. Nonetheless, the agency affirmed its Aa3 bond ratings despite a downgrade by Fitch Ratings last week on the pretext of the huge indebtedness of local governments, which was the main reason behind today’s outlook revision.
Source: RTT Staff Writer
Source: Bullion Bulletin