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Gold climbs to 1-week high on slowing China growth prospects

Investing.com -

Investing.com - Gold futures were higher in European trade on Monday, climbing to a one-week high as weak economic data out of China released over the weekend added to concerns over the health of the world's second largest economy.

Industrial production rose at an annualized rate of 6.0% in April, below expectations for a 6.5% increase and slowing from a gain of 6.8% in the preceding month, the General Administration of Customs said on Saturday.

Fixed asset investment, which tracks construction activity, rose 10.5% last month, below forecasts for an increase of 10.9%.

The soft data followed disappointing Chinese trade and inflation figures last week, adding to doubts about whether the world's second-largest economy is stabilizing.

Gold for June delivery on the Comex division of the New York Mercantile Exchange rose by as much as 1% to a daily peak of 1,285.50 a troy ounce before giving back some gains to trade at $1,283.25 by 06:47GMT, or 02:47AM ET, up $10.55, or 0.83%.

On Friday, gold inched up $1.50, or 0.12%, as traders reassessed their expectations for the timing of the next U.S. rate hike following the release of better than expected U.S. retail sales and consumer sentiment data.

Retail sales rose 1.3% in April, the Commerce Department said, posting its largest gain in a year, as Americans stepped up purchases of automobiles and a range of other goods. Economists expected sales to increase 0.8%.

Meanwhile, the preliminary reading for consumer sentiment in May jumped to an 11-month high of 95.8, well above the expected reading of 90.0, driven by steadily rising incomes, better employment prospects and low inflation.

The upbeat data suggested the economy was regaining momentum after growth almost stalled in the first quarter, bolstering the view that the Federal Reserve is still on track to raise rates before the end of the year.

Prices of the yellow metal are still up nearly 19% so far this year amid indications the Fed will take a slow and cautious approach to raising interest rates this year.

Gold is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

In the week ahead, market players will be turning their attention to Wednesday's minutes of the Federal Reserve's April policy meeting for fresh clues on the timing of the next U.S. rate hike.

U.S. inflation data will also be in focus, as investors attempt to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.

Elsewhere on the Comex, silver futures for July delivery climbed 19.8 cents, or 1.16%, to trade at $17.33 a troy ounce during morning hours in London, while copper futures tacked on 0.8 cents, or 0.39%, to $2.082 a pound.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was at 94.56, after climbing to 94.84 on Friday, the most since April 25.

A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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