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Gold climbs with riskier assets on China data

Singapore, January 17, 2012

Spot gold rose more than half a percent on Tuesday, encouraged by revived risk appetite that lifted markets across the board, after China announced better than expected economic growth in the last quarter of 2011.     

The world's second-largest economy grew 8.9 percent from a year earlier in the fourth quarter, beating a forecast of 8.7 percent by economists polled by Reuters, although it was the slowest growth in 2-1/2 years.      

"The data showed that China's economic growth was not as bad as feared and there was too much panic in the market," said Bonnie Liu, an analyst at Macquarie in Shanghai.     

Spot gold gained 0.7 percent to $1,655.40 an ounce, heading for a second consecutive session of gains.      

US gold stood at $1,655.90, up 1.5 percent from Friday's settlement, after a public holiday on Monday.     

Riskier assets, such as equities and base metals, firmed on China's economic data, which offered a glimpse of hope amid global growth prospects clouded by the euro zone debt crisis.

The euro gained half a percent against the dollar on the China data, recovering from a 17-month trough hit after Standard & Poor's downgraded the credit ratings of nine euro zone nations and the bloc's bailout fund over the past two sessions.

After a knee-jerk reaction on Friday to S&P's mass downgrades, investment interest returned, with equities recovering and French short-term borrowing costs falling slightly on Monday.      

"The muted response on the market yesterday made everyone confident on risk again," said a Singapore-based trader who expected gold to be range-bound on an elevated platform of $1,630 to $1,670.     

Gold in the past few months has tracked moves in riskier assets, as the turmoil in financial markets often forced investors to sell their gold holdings to cover losses elsewhere.     

Technical analysis suggested spot gold may consolidate in the range between $1,625.20 and $1,661.71 an ounce during the day, said Reuters market analyst Wang Tao.

Physical gold purchases from China still trickled in ahead of the weeklong Lunar New Year holiday starting next Monday, but are expected to slow down in the rest of the week.     

"Chinese banks are still buying small quantities, but the activities are quieting down," said the Singapore-based trader.     

Premiums on gold bars in Hong Kong were steady at about $2 an ounce over spot prices, dealers said. – Reuters




Tags: China | Gold | Singapore | Rates | Economic Growth |

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