Gold prices up in Asia as China PMI flash survey shows dim picture

© Reuters. Gold gains in Asia after Caixin flash PMI weaker

Investing.com - Gold gained in Asia on Friday after a weaker than expected manufacturing flash survey from Caixin and as investors increasingly doubt the Federal Reserve will raise rates in September.

The Caixin China Manufacturing PMI flash fell to 47.1, a 77-month low, from an expected 47.7 for August. The Nikkei Japan PMI Manufacturing survey eased to 51.9 in August fro the flash estimate, below the 52.1 level seen.

On the Comex division of the New York Mercantile Exchange, gold for December delivery rose 0.44% to $1,158.30 a troy ounce.

Silver for September delivery eased 0.11% to 15.500 a troy ounce, while copper for September delivery dropped 0.27% to $2,314 a pound.

Overnight, gold futures surged on Thursday enjoying one of their strongest one-day moves of 2015, following relatively dovish minutes from the Federal Open Market Committee's July meeting strengthened the possibility of a delayed interest rate hike from the U.S. central bank.

Investors continued to digest the minutes from the FOMC's July meeting on Thursday, ones in which the Fed offered no clear indications on an imminent rate hike.

The FOMC appears particularly concerned with the deceleration of inflation, as it continues to remain under its long-term targeted goal of 2%. While the Consumer Price Index (CPI) inched up 0.1%, it still fell under analysts' forecasts of a 0.2% monthly gain. The Core CPI Index, which strips out food and energy prices, rose by 1.8% on a yearly basis, also falling below the Fed's target by 0.2%.

The FOMC appears sharply divided on whether inflation is moving close to a level it deems appropriate to start raising short-term rates. The FOMC said by some objectives the inflation data was "not progressing" toward its targeted goal, according to the minutes. Other members, however, said that inflation conditions for a rate hike would be met or could be "met shortly."

The Fed's benchmark Federal Funds Rate has remained at its current level between zero and 0.25% since 2009 at the conclusion of the Financial Crisis. In addition, nearly a decade has passed since the Fed has last raised the benchmark rate.

Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in raising rate environments.

Although Fed chair Janet Yellen has indicated that it is likely the FOMC will lift its benchmark Federal Funds Rate in 2015 if economic conditions continue to improve, the Fed has not said definitively that lift-off will occur in September. Following the dovish reading on Wednesday, a large percentage of inventors now believe it is more likely that lift-off will take place in December.

The minutes also showed that the Fed has expressed mounting concerns with the slumping Chinese equities markets. Several participants in the July FOMC meeting noted that a "material slowdown in Chinese economic activity" could have a spillover effect into the U.S. economy. China is the world's largest producer and second-largest consumer of gold behind India.

Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.