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Gold drops as investors sell for profits, Chinese inflation data weighs

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Investing.com - Gold prices fell on Friday after investors sold the yellow metal to take profits, especially after Chinese inflation rates came in higher than expected.

Gold made solid gains earlier this week after the European Central Bank voted unanimously to leave interest rates unchanged at 0.75%, sparking a risk-on trading session that sent the U.S. dollar tumbling and the euro gaining, a recipe for a gold rally.

Gold and the dollar traditionally trade inversely from one another.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 1.10% at USD1,659.55 a troy ounce in U.S. trading, up from a session low of USD1,653.55 and down from a high of USD1,676.25 a troy ounce.

Gold futures were likely to test support USD1,643.25 a troy ounce, Monday's low, and resistance at USD1,678.75, Thursday's high.

In Europe, the ECB voted unanimously to leave interest rates unchanged, which sent gold prices soaring on Thursday to levels ripe for profit taking, which kicked in Friday.

While most market participants were expecting the monetary authority to leave benchmark lending rates unchanged, not all expected unanimous support, while others were expecting more cautious language from ECB President Mario Draghi, who predicted recovery to gain steam later this year.

Gold prices rallied to levels ripe for profit taking especially after Chinese inflation data came in stronger than expected, quelling expectations for Beijing to stimulate its economy, a potentially bullish event for gold.

In a report, the National Bureau of Statistics of China reported that the country's December consumer price index rose 2.5% on year from 2.0% in the preceding month.

Analysts had expected the Chinese CPI to rise by 2.3% last month.

Meanwhile on the Comex, silver for March delivery was down 1.67% and trading at USD30.403 a troy ounce, while copper for March delivery was down 1.33% and trading at USD3.660 a pound.

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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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