Gold began to work its way back up from a three-week low as lax Chinese trade data and Greek uncertainties hurt European equities. The dollar on the other hand, remained steady throughout and capped the upside. U.S. gold futures settled $6.90 higher at $1,241.50 an ounce, while spot gold gained 0.7 percent at $1,239.56 an ounce. This past Friday, the precious metal recorded it largest one-day loss since December of 2013, dropping to $1,228.25 while the dollar benefitted from strong U.S. payroll data.
“For the three months up to the FOMC meeting gold has behaved as a safe haven because of Greece, but now the focus has shifted back to the U.S. and the timing of the U.S. interest rates hike,” Citi analyst David Wilson said, referring to last month’s interest-rate policy meeting of the Federal Open Market Committee. “We are seeing gold lower in the second quarter as the market does not seem really concerned about the impact of Greece on the rest of Europe at the moment.”
While disappointing news out of Chinese trading data raised concerns about the growth of the world’s second biggest economy, gold was assisted by European shares tracking losses on Wall Street and in China.
The dollar continued on steady even after giving up some of its gains from Friday, with data showing stable job growth throughout January and rebounding wages. That being the case, all signs indicate economic strength that has put a mid-year interest rate increase back on the table by the Federal Reserve. Near zero benchmark borrowing costs have been held by the U.S. central back since December of 2008. This rate increase should boost the dollar and affect the demand for gold, a non-interest bearing asset.
Chinese premiums rose up between $4 to $5 an ounce in the physical markets, as last week’s sharp decline in prices attracted buyers. Chinese consumers have been and will be buying gold ahead of the Lunar New Year on Feb. 19th to the 20th. Gold is the traditional gift-giving commodity for the Lunar New Year celebration, but buying will slow during and just before the festivities.
