Despite the likelihood of future U.S. interest rate increases keeping investors on edge, gold prices rose on Friday as the dollar weakened against the yuan in response to encouraging economic statistics from China, the world’s largest consumer of gold.
By 03:20 GMT, spot gold was up 0.3%, trading at $1,915.09 an ounce. Even after falling to its lowest level since August 23 on Thursday, near $1,900, gold was still expected to experience a little weekly decline. Futures for U.S. gold increased 0.2% to $1,936.70.
After data revealed that China’s factory output and retail sales in August exceeded expectations, the yuan reached two-week highs against the dollar. Bullion priced in US dollars is more appealing to foreign investors when the currency is weaker.
According to data released on Thursday, U.S. producer prices rose last month at their fastest rate in more than a year, and retail sales outperformed forecasts because to an increase in petrol costs.
This comes as August saw the biggest increase in U.S. consumer prices in 14 months, keeping hopes alive for more rate increases by the Federal Reserve following a possible halt next week.
Yeap Jun Rong, a market strategist at IG, stated that non-yielding gold prices have been under pressure due to the expectation that rates will be held high for longer.
The necessity for rate reduction does not appear to be justified anytime soon, with the deadline for cuts being continuously pushed back into mid-next year, given the country’s relatively robust economic conditions.
The European Central Bank likewise increased its benchmark interest rate on Thursday to a record high of 4%, but gave notice that this would likely be the last increase.
The demand for bullion, which pays no interest, typically declines when interest rates rise to combat inflation.
Spot silver increased 1% to an ounce at $22.86. Palladium increased by 0.3% to $1,254.42 and platinum increased by 0.6% to $911.92, both of which were poised for weekly increases.