Gold eases in Asia as HSBC China flash PMI shows continued weakness

Investing.com - Gold prices held weaker in Asia on Thursday after China showed continued weak manufacturing in a survey of purchasing managers.

Meanwhile, in Australia is the first quarter NAB business confidence and business conditions survey showed confidence flat from plus-2 in the fourth quarter and conditions down to plus-2 from plus-5.

In China, the HSBC (LONDON:HSBA) flash manufacturing PMI fell to 49.2 in April from March's final of 49.6, shrinking for the third month in-a-row.

"The HSBC Flash China Manufacturing PMI signaled a slight deterioration in the health of China's manufacturing sector in March," said Annabel Fiddes, economist at Markit.

A renewed fall in total new business contributed to a weaker expansion of output while companies continued to trim their workforce numbers. Meanwhile, manufacturing companies continued to benefit from falling input costs stemming from the recent global oil-price decline. However, relatively muted client demand has led firms to pass on savings in a bid to boost new work and cut their selling prices at a similarly sharp rate."

On the Comex division of the New York Mercantile Exchange, Gold futures for June delivery eased 0.12% to $1,185.50. Elsewhere, Silver for May delivery fell 0.15% to 15.773 a troy ounce.

Copper for May delivery rose 0.19% to $2.676 a pound.

Overnight, gold futures prices plummeted on Tuesday slipping under $1,200 an ounce, as upbeat U.S. economic data fueled speculation that the Federal Reserve might institute an interest-rate hike by June after all.

Gold prices dipped on Wednesday after the National Association of Realtors said existing home sales increased 6.1% last month to 5.19 million, its highest level in 18 months. Economists polled by Reuters expected the figure to tick up to increase to 5.03 million.

Separately, the Mortgage Bankers Association said mortgage applications swelled by 5% for the week ending April 17, marking its fourth increases over the last five weeks. A decrease of four basis points in mortgage rate in comparison with the prior week helped boost demand.

The Federal Housing Finance Agency (FHFA) also said Wednesday that its House Price Index (HPI) ticked up 0.7% in February, above a 0.4% increase a month earlier. The index, which covers single-family housing by evaluating data compiled by Fannie Mae and Freddie Mac, increased 5.4% on a year-over-year basis. In its previous monthly report, the FHFA said the index rose 5.1% from its level during the same period last year.

The Fed is taking a data-driven approach, as it contemplates on the timing of its first interest-rate hike since 2009. In recent weeks, worse than expected import/export, industrial production and employment data have lowered expectations of an imminent rate hike when the Federal Open Market Committee meets in June.

When the Fed released the minutes from its Federal Open Market Committee meeting in March on April 8, it reiterated that it will phase in monetary policy changes gradually when it is confident that the economy is strong enough to handle a rate increase.

"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%," the Fed said in the minutes. "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

Gold struggles to compete with high yield-bearing assets in periods of rising interest rates. On March 6, gold plunged by more than $30 an ounce when a strong U.S. jobs report for the month of February provided an indication that the Federal Reserve could alter its interest rate environment.