Gold steady near 1-week high ahead of Fed minutes

July 10, 2013 8:21 am

gold-front_1805318bGold steadied near one-week high during early European trading after dropping in the Asian session on weak economic data from China.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at $1 253.95 per troy ounce at 8:15 GMT, up 0.65% on the day. Prices held in range between day’s high and low of $1 254.65 and $1 242.35 an ounce respectively. The precious metal settled 1.2% higher yesterday, adding to its 2.48% advance for the week.

Gold has declined 26% this year, around 22% of which during the second quarter as Ben Bernanke, Fed Chairman, announced after the latest Federal Open Market Committee meeting that the central bank is likely to decelerate its bond purchasing program during the second half of the year and bring it to an end by mid-2014, if the required signs of consistent economic recovery are at hand. So far, most of the key U.S. economic indicators have met projections and in some cases exceeded them, supporting Fed’s intentions.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, dropped to 939.75 metric tons yesterday, the lowest since February 2009.

Today, China reported its June exports and imports declined, while an increase was expected. The General Administration of Customs said the Asian country’s exports fell 3.1% compared to the same month a year earlier, mismatching projections of a 3.7% increase according to a Bloomberg survey. The report also showed a 0.7% decline in imports compared to June 2012, which brought the country’s trade surplus to $27.1 billion for the month, generally meeting projections of $27 billion.

Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. in Singapore, said for Bloomberg: “The numbers were much worse than what the market was looking for. The U.S. dollar is still rallying and Treasury yields are still trying to find a top. It’s still a pretty negative environment for gold.”

James Steel and Howard Wen, analysts at HSBC Securities (USA) Inc., wrote in a report: “Gold prices have developed a positive correlation with emerging market assets, which have weakened as pointed out by the IMF. The drop in developing economies’ currencies is U.S. dollar positive and gold-bearish.”

The International Monetary Fund cut its global growth forecast for a fifth time this year, due to slowdown in emerging economies and struggling with recessions Europe. On Tuesday, the IMF trimmed its 3.3% global economic expansion forecast for 2013 down to 3.1%. The 2014 projection was also reduced, down to 3.8% from 4.0%.

The dollar index with September settlement reached a three-year high on Friday, which was outperformed on Monday and once again refreshed on Tuesday, hitting 84.96. On Wednesday, the U.S. currency gauge, which measures the greenback’s performance against six major counterparts, traded at 84.51 at 8:06 GMT, down 0.39% on the day. So far, it has posted a 0.2% weekly loss, but investors are keeping a close eye on Wednesday’s Fed minutes, which will provide additional information on the central bank’s future monetary policy. In addition, Ben Bernanke’s speech at a National Bureau of Economic Research conference in Boston later today will most likely cause the dollar to fluctuate, influencing gold prices.

Elsewhere on the precious metals market, silver and palladium were trading on the upside, while platinum declined. Silver for September delivery stood at $19.228 an ounce, up 0.47% on the day. Prices varied between day’s high and low of $19.278 and $18.987 respectively. Platinum October futures traded at $1 367.20 at 8:18 GMT, down 0.10%. The metal held in ranged between $1 372.20 and $1 356.06. Meanwhile, palladium for September delivery stood at $701.60 an ounce, up 0.61% on the day. Prices ranged between day’s high of $703.70 and low at $698.10.

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