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Gold plunges in panic selling on weak Chinese, U.S. output data

CommoditiesApr 15, 2013 12:19PM ET
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Investing.com - Gold prices plunged amid panic selling on Monday after China reported that its first-quarter gross domestic product rate missed expectations and sparked a risk-off trading session, while soft U.S. factory data sent investors rushing to the safety of the dollar.

The dollar normally trades inversely from gold, which fell even harder than other risk-on asset classes amid sentiments that when U.S. recovery does regain steam, the Federal Reserve will unwind stimulus measures that have supported prices for several years now.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery were down 9.22% at USD1,362.95 a troy ounce in U.S. trading on Monday, up from a session low of USD1,355.85 and down from a high of USD1,494.95 a troy ounce.

Gold futures were likely to test support USD1,354.45 a troy ounce, Feb. 14, 2011, and resistance at USD1,418.75, the high from Feb. 24, 2011.

Official data out of Beijing revealed that the Chinese gross domestic product expanded by 7.7% year-on-year in the three months to March, down from 7.9% in the fourth quarter and well below expectations for 8.0% growth.

Chinese industrial production, meanwhile, also failed to meet market expectations.

The Asian giant's industrial production grew 8.9% on-year in March, below market calls for 10.0% growth and also below a 9.9% reading in February.

Chinese retail sales, on the other hand, grew 12.6%, beating market consensus for a 12.5% reading as well as February's 12.3% rate.

Meanwhile in the U.S., the Federal Reserve's Empire State manufacturing index, a key gauge of economic health in New York State, fell to 3.1 in April from 9.2 the previous month, falling far short of market expectations for a decline to 7.0.

The news sparked a global risk-off trading session that punished gold especially hard due to technical factors.

Monday's ultra-bearish data came a day in wake of disappointing indicators in the U.S.

In the U.S. on Friday, the Thomson Reuters/University of Michigan's preliminary consumer sentiment index dropped to a 9-month low in April, falling to 72.3 from 78.6 in the previous month.

Analysts were expecting the index to tick down to 78.5 this month.

Elsewhere, official data revealed that retail sales in the U.S. fell 0.4% in March, defying expectations for a 0.1% rise after a 1% increase the previous month.

Core retail sales, which are stripped of volatile automobile sales, also dipped 0.4% last month after a 1% increase in February, missing similar expectations for a 0.1% rise.

The Federal Reserve has said it will keep monetary stimulus measures in place for now, though recent language from the U.S. central bank suggested such programs may begin to unwind later this year, which would support the dollar and tarnish gold's appeal as a hedge during loose monetary policies pushed through since the 2008 financial crisis.

Elsewhere on the Comex, silver for May delivery was down 10.74% at USD23.502 a troy ounce, while copper for May delivery was down 2.84% and trading at USD3.255 a pound.

Gold plunges in panic selling on weak Chinese, U.S. output data

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