Bullion reaches three week highs, supported by strong global economic cues, lackluster US data and a surge in Chinese physical demand. The US Dollar’s slide last week further helped gold to consolidate its gains, as it reversed its losing streak to form a clear uptrend.

On Wednesday last week, gold futures initially dropped by 0.2% to trade at $ 1,281.12, while spot silver fell by 0.73% to $ 19.43. Later on Thursday, gold bucked the downtrend, as its December delivery soared up by 1.9 % to reach a high of $1,309.90 per ounce as of 01:49 EST. In line with this trend, spot gold too rose by 0.36% to $1,290.37, while platinum increased by 0.81% to $1,449.35 and palladium moved up by 0.62% to $728.30.

On Friday, Bullion further extended its rally, as gold for December delivery, the most actively traded contract, advanced by 0.2% to close at $1,312.20 an ounce in NYMEX. Similarly, on the same day, spot silver prices too edged up by 0.39% to trade at $ 20.27.

Gold was initially down on Wednesday as it had reached its three week low due to strong US data and some Federal officials’ tapering comments. The US trade deficit had narrowed by 22.4% to $34.2 billion, more than the expected $43.5 billion levels. The Fed officials, namely the Presidents of Dallas and Chicago Banks, commented that the recent positive economic data will bring Fed closer to scaling back its monetary stimulus.

Later on Thursday, China’s export and import data boosted gold prices. China’s export increased by 5.1% while, the imports grew by 10%, well above the market expectations. This increased Gold’s demand outlook. Meanwhile, the US jobless claims report was lukewarm showing an increase of 5000 to 333,000, against an expected increase of 336,000. This hurt the US Dollar and consequently drove up the gold prices.

Later, China’s industrial data released by National Bureau of Statistics revealed a 9.7% growth in July compared to 8.9% rise in June. This is its highest growth in the past five months. Also, the US Commerce department revealed that the wholesale inventories dropped by 0.2% against a forecasted increase of 0.4%. This sent gold on a firm rally as it was buoyed by a US Dollar plummeting to a seven-week low. 

Starting this week, on Monday, gold continued its sharp rally, as its December delivery surged by 1.7% to close at $1,334.20 an ounce, its highest in the past three weeks. Spot gold too traded higher at $1336.37 an ounce, its highest since July 24. Silver too, mirroring this trend, rose to a two month high of $21.24 an ounce.

But, on Tuesday, Gold seemed to slightly cut back its gains, as spot gold settled lower at 0.1 percent to $1,334.24 an ounce by 0340 GMT. In line with this trend, silver too slid by 4% and palladium slipped by 0.03% to $ 737.50.

On Monday, gold hit its three week high, due to expectations of an increase in the physical demand from China and a surprising increase in inflows of SPDR holdings. According to China Gold Association, the world’s second largest gold consumer had increased its Gold imports to 706.36 tonnes in first half of 2013, which is a 54% year-on-year increase.

Also, the holdings of the SPDR Gold Trust, which was having persistent outflows, surprisingly showed an increase in its inflow by 0.2% to 911.13 tons from 909.33 tons. This greatly boosted gold’s demand outlook and drove up its prices. 

However, gold rally was halted on Tuesday as the US retail sales data was expected to rises for the fourth consecutive month. This slightly pushed up the Dollar index to 81.45 after opening at 81.16. This strengthened the speculation of Fed tapering its asset purchase policy and put Bullion on the back foot.

Thus, Gold price that had a sharp rally till Monday had its gains capped by positive US data forecasts. With the Yen decreasing, the US Dollar might gain strength from future positive US data. This might tamp down the gold prices, while the rise in physical demand will grant ample support.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.