Investing.com - Gold futures fell nearly 1% on Friday, as
sentiment on the precious metal turned negative after data showed
inflation in China accelerated at the fastest pace in seven months
in December, dampening hopes for near-term stimulus measures from
On the Comex division of the New York Mercantile Exchange, gold
futures for February delivery dropped 0.9% on Friday to settle the
week at USD1,662.55 a troy ounce.
Despite Friday's downbeat performance, futures prices ended the
week with a 0.4% gain, the first weekly advance in seven weeks, as
indications of improving physical demand for the precious metal in
China ahead of the country's Lunar New Year supported gains.
Demand from the Asian nation usually picks up before Christmas and
lasts through the Lunar New Year in February. China is the world's
biggest bullion consumer after India.
Gold prices were likely to find support at USD1,626.05 a troy
ounce, the low from January 4 and resistance at USD1,680.95,the
high of December 30.
Futures came under pressure Friday after official data showed that
consumer price inflation in China accelerated by 2.5% in December,
up from 2% in November and above expectations for a 2.3% increase.
Politically sensitive food costs accelerated 4.2% in December from
a year earlier. The rise in Chinese food costs was driven by a
14.8% increase in the price of vegetables.
The higher-than-expected reading dampened expectations Beijing will
introduce fresh monetary easing measures in the near-term to prop
up the world's second largest economy.
Loose monetary policies employed by central banks in the U.S.,
Europe and China have helped boost demand for gold in recent years
as investors sought the precious metal as a hedge against currency
Gold futures rallied to a one-week high on Thursday, as the U.S.
dollar came under heavy selling pressure after the European Central
Bank kept interest rates unchanged at 0.75% and said a gradual
economic recovery would begin this year.
Dollar-denominated gold tends to trade inversely to the U.S.
In the week ahead, gold traders are expected to remain focused on
the outlook for Federal Reserve monetary policy, as well as
political developments in the U.S., with negotiations on raising
the U.S. debt ceiling still to come in February.
Investors will be anticipating a speech by Fed Chairman Ben
Bernanke on monetary policy and the recovery from the global
financial crisis on Monday.
Gold futures tumbled to a four-month low on January 4 after the
minutes from the Fed's December meeting indicated that the central
bank could end its quantitative easing program
The Fed's quantitative easing program is viewed by many investors
as a major source of liquidity that weakens the U.S. dollar and
helps support prices of commodities and other hard assets,
Elsewhere on the Comex, silver for March delivery fell 1.5% on
Friday to settle the week at USD30.46 a troy ounce. Despite
Friday's losses, silver futures added 0.8% on the week.
Meanwhile, copper for March delivery declined 1.35% Friday to close
the week at USD3.659 a pound. Copper prices fell 1.1% on the week.
Market players will also be awaiting data from China on fourth
quarter gross domestic product for signs of a recovery in the
world's second-largest economy.
The Asian nation is set to release government data on the size of
its economy on January 18. China is the world's largest copper
consumer, accounting for almost 40% of world consumption last year.
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