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Gold prices gain in Asia after China PMIs point to weak economy

Published 01/31/2016, 09:35 PM
Updated 01/31/2016, 09:37 PM
Gold gains in Asia after China PMIs

Gold gains in Asia after China PMIs

Investing.com - Gold prices rose after mixed manufacturing and services data out of China bolstered expectations for continued easy global monetary policies.

In China the semi-official manufacturing PMI for January reached 49.4, missing the 49.6 level seen and remaining in contraction and the Caixin Manufacturing PMI index came in at 48.4, a bit above the expected 48.0. As well, Japan reports its manufacturing PMI, with a 52.4 level seen. The non-manufacturing PMI in China hit 53.5, down from 54.4 the previous month.

Figures above 50 suggest expansion and those below contraction.

"The upshot is that economic momentum may have deteriorated last month. That said, we can’t be certain yet," Capital Economics said in a note to clients after the data. "The PMIs provide and early hint of how the economy is performing but we don’t recommend putting too much weight on them. The official manufacturing PMI, in particular, appears to have been a poor gauge of economic activity over the past year."

Earlier the AIG Manufacturing index in Australia for January came in at 51.5 with last month's reading at 51.9. As well, the MI Inflation Gauge is due for a month-on-month estimate.

Gold for February delivery on the Comex division of the New York Mercantile Exchange rose 0.43% to $1,121.20 a troy ounce after the data.

Also on the Comex, silver futures for March delivery gained 0.29% to $14.285 a troy ounce, while copper for March was down 0.90% to $2.043 a pound.

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report for January to gauge if the world's largest economy is strong enough to withstand further rate hikes in 2016.
Market players will also be looking out for reports on the manufacturing sector due on Monday, amid ongoing concerns over the health of the world's economy.

European Central Bank President Mario Draghi is to testify about the bank’s annual report for 2015 before the European Parliament, in Strasbourg.

Last week, gold prices inched higher on Friday, drawing support from weak U.S. GDP data that raised hopes the Federal Reserve may slow any planned interest rate hikes.

The Commerce Department said Friday that the U.S. economy grew at an annual rate of 0.7% in the fourth quarter, missing expectations for growth of 0.8% and slowing from 2.0% in the preceding quarter.
Gold prices rallied to a three-month peak of $1,128.00 on Wednesday as market players viewed the Federal Reserve’s policy statement as slightly dovish.

As expected, the Fed kept interest rates unchanged at the conclusion of its policy meeting and said it was "closely monitoring" global economic and financial developments.

Traders are anticipating just one more rate hike this year, most likely in July, compared with four according to Fed policymakers' guidance. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.

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