In London, gold prices rallied as signs show slower economic growth in China and the US, as well as predictions that the dollar will weaken. This trend is expected to boost the demand for gold, as it is known as a good alternative investment.
Yesterday, the Federal Reserve cut its predictions for the expansion of the US economy and China reported that during the second quarter, its pace of economic growth bogged down slightly. The dollar weakened, falling to an all-time low in nine weeks against the Euro. Gold, whose usual trend is usually opposite that of the US dollar’s, traded at 4.1 percent below last month’s record-high.
“The safe-haven part for demand is important and will be the most important thing to watch in the next few weeks,” Analyst Dan Smith of London-based Standard Chartered Plc said. “Gold seems to be reverting back to its relationship with the dollar. There is also an argument that the selloff in gold from its high was overdone.”
Gold set for immediate delivery rose 0.5 percent or $5.60, ending at 1,213.90 per ounce in London. Gold bullion set for delivery in August was even higher at $1,213.80 in New York’s Comex sector.
China’s economic growth lagged, slowing to 10.3 percent, compared to a growth of 11.9 percent during the previous year’s first quarter, after its government was successful at tempering credit expansion, property speculation and investment spending. Inflation slowed to 2.9 percent last June, while industrial output stood at 13.7 percent, which is below investors’ expectations.
The policy makers at the Federal Reserves said the outlook had somehow softened and risks arising from the recovery have risen, based on minutes released yesterday from a meeting last June 22-23. US central banks had conservative central tendency forecasts in terms of this year’s growth, with prediction ranging from 3 percent to 3.5 percent.
US retailers noted a drop in sales by 0.5 percent last June, which is bigger than what was originally projected.
“The modest and uneven pace of economic recovery, reinforced by the Fed’s minutes and weak retail-sales figures, may drive investors to seek out gold as a form of portfolio insurance,” Singapore-based analyst Ong Yi Ling of Phillip Futures Pte said.
Gold’s overall upward trend stands at 11 percent for 2010, gearing up for a 10-year annual increase streak. The precious metal peaked on June 21 at $1,265.30 as investors rushed to maintain their wealth against the economic crisis in the Eurozone.
