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Gold falls as China rate cut boost stocks, dollar

LONDON, August 25, 2015

Gold fell on Tuesday as global markets rebounded from the previous day's rout after China cut interest rates to stimulate its wavering economy, with European stocks rising 4.5 per cent and the dollar up 1 per cent versus the euro.

Autocatalyst metal palladium continued to slide, however, falling as much as 7 per cent to its lowest in five years.

Spot gold was down 0.6 per cent at $1,147.26 an ounce at 1151 GMT, while US gold futures for December delivery were down $6.60 an ounce at $1,147.00.

Gold had edged lower on Monday, with some traders citing liquidation to cover losses on other markets, but largely held its ground after a plunge in Chinese equities sent world stocks and commodity prices tumblinfg and knocked the dollar.

Markets made gains after China's central bank cut interest rates and lowered the amount of reserves banks must hold for the second time in two months.

“If those trends continue, then certainly it will create some short-term pressure on gold prices as the initial fear in the marketplace that we saw yesterday dissipates,” Standard Chartered analyst Nicholas Snowden said.

Gold has rebounded sharply from the 5-1/2 year low it hit in July on the back of expectations that the Federal Reserve was on track to raise interest rates this year for the first time in nearly a decade, lifting the opportunity cost of holding gold while boosting the dollar.

While those expectations have receded after a dovish reading of the minutes of the Fed's last policy meeting and on fears of a broader global economic slowdown, they are keeping a lid on gold's gains.

“We're still in an environment where we know US interest rates will go up,” Snowden added. “For gold, that limits how much of a bid you will see, even with the sort of financial market turmoil that ensued yesterday.”

Palladium fell to a low of $528.50 an ounce, its weakest since September 2010, and was later down 2.7 per cent at $555.47.

“Platinum group metals have noticeably been lagging in recent weeks, failing to benefit more from gold's rebound,” UBS said in a note.

Platinum was down 0.2 per cent at $986 an ounce, while silver was down 0.1 per cent at $14.77 an ounce. - Reuters




Tags: Gold | Dollar | China rate |

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