Recovering Gold Prices After Second Quarter Nosedive
Gold for August delivery was up 2.6% stabilizing at $1,255.70 per ounce on the New York Mercantile Exchange
Climbing to $32, gold for August delivery was up 2.6% stabilizing at $1,255.70 per ounce on the New York Mercantile Exchange.
Global trading director at Kitco Metals Inc., Peter Hug, explained that markets have a tendency to backfill when they wash out and break support levels. He was referring to the gains in gold prices from the past week.
According to FactSet data, gold experienced its worst quarterly decline since the mid-1970s when modern trading began.
Deutsche Bank released a report last week about the metals and mining sector, which explained how a variety of factors impacted the commodity complex, including tame global inflation, the unwinding of the global carry trade and the strengthening of the U.S. dollar. The report also stated that slower than expected Chinese growth and rumors of the U.S. Federal Reserve pulling back on the amount it provides to stimulate the economy also influenced the sector.
Other reports released at the beginning of July showed that China’s manufacturing sector further slowed in June. China is a major consumer of gold.
The Chinese government stated that its manufacturing Purchasing Managers’ Index (PMI) decreased from 50.8 to 50.1 in May. Similarly, a survey from HSBC showed that its monthly PMI had declined from 49.2 in May to 48.2 in June. A reading above 50 shows increasing activity, while one below signals deterioration.
However, data from the U.S. was more positive. The factory index from the Institute for Supply Management rose from 49.0% in May to 50.9% in June, which exceeded market expectations.
The world’s largest gold miner, Barrick Gold Corp., stated last week that it will postpone the opening of its newest gold mine in Chile and Argentina by at least two years. This is not surprising given gold’s second quarter nosedive.
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