Gold prices lower in early Asia as easy policy views dominate outlook

Gold prices dip in Asia on easy policy views

Gold prices dipped in early Asia on Thursday with investors more convinced that easy monetary policies will stay in place for the near-term future around the globe. On the Comex division of the New York Mercantile Exchange, gold futures for June delivery dipped 0.44% to $1,212.900 a troy ounce. Silver for July delivery dropped 0.57% to $17.123 a troy ounce. Copper for July delivery eased 0..17% $2.931 a pound.

Overnight, gold futures surged nearly 2% on Wednesday reaching a six-week high, as soft U.S. economic data reinforced support for a delayed interest rate hike by the Federal Reserve.

The precious metal began its upward rise in the U.S. morning trading session following a torrent of worse than expected economic indicators.

The U.S. Department of Labor said Wednesday that import prices slid 0.3% in April, following a 0.2% decline a month earlier. On a year-over-year basis, import prices have fallen by more than 10% after the 10th consecutive monthly decline. The figured defied economists’ expectations of a 0.3% gain.

Meanwhile, U.S. retail sales remained flat in April below economists’ forecasts of a 0.2 gain. A reading of department store sales for the month showed a sharp decline of 2.2%, while sales of electronics and appliances fell by 0.4%. Since last April, retail sales have edged up only 0.9%, the lowest level dating back to late 2009.

The readings provide signals of modest inflationary pressures, augmenting the positions of the doves on the Federal Open Market Committee, who have taken a cautious approach to the timing of its first interest rate hike in nearly a decade.

Last month, the FOMC removed all calendar references to the timing of a potential hike. While it appears increasingly likely that the Fed will wait until September or even December before raising its benchmark Fed Funds Rate from its current level of zero to 0.25%, the FOMC still has not taken a June rate hike off the table.

Gold, which is not attached to dividends or interest rates, struggles to compete with high yield bearing assets in periods of rising rates.

Elsewhere, the Federal Reserve of Atlanta said in its monthly business report that inflation expectations for May ticked up to 1.9%, up from 1.7% in April, amid rising oil prices. In its forecast last May, the Atlanta Fed predicted that inflation would increase at a slightly slower pace to 1.6%. The poor economic indications on Wednesday weighed heavily on the dollar.

In China, industrial output rose by 5.9% in April, well below yearly GDP growth rates of 7%. It is a poor sign for the Chinese economy when industrial output falls below overall economic growth. China is the world’s largest producer of gold and second-largest consumer of the precious metal.


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