Gold News & Info

Source: Bill Musgrave, American Gold Exchange

Austin— Breaking a five-day winning streak, gold slid 0.7% to close under $1,116 after generally upbeat U.S. data boosted the dollar, and Chinese officials tried to ease fears of further yuan depreciation.

The Commerce Department reported retail sales rose in July by a solid 0.6% and figures for May and June were revised upward, improving prospects for consumer spending in the second half of the year. In addition, jobless claims fell to the lowest four-week average since April 2000, suggesting better health in the labor markets.

The dollar rose against major rivals on the stronger data, which traders viewed as supporting the argument for a rate increase by the Fed, perhaps in September. Higher rates will further strengthen the dollar, in turn weighing on gold and other commodities by making them more expensive to users of other currencies.

Not all today's data point to a September hike, however. Import prices fell nearly 1% last month for the first drop since April, the BLS reported, and export prices fell by 0.2%. Persistently low U.S. inflation has been a main obstacle to tighter monetary policy. Furthermore, China's devaluation of the yuan by 3.5% this week adds to global deflationary pressure, something of serious concern to the Fed and central bankers everywhere.

The PBOC tried to sooth the markets today by claiming that China has no need to cheapen its currency further, citing its economy's "sound fundamentals" despite a steady recent stream of weak data and the slowest growth in decades. Analysts remain skeptical, however, as Reuters reported yesterday that powerful voices within the government are pushing for a much cheaper yuan.

According to the World Gold Council's newest report on quarterly trends, overall demand for gold fell 12% worldwide in the second quarter, led by weakness in the key markets of China and India, which account for nearly half of all gold consumption. Jewelry purchases fell 14% while investment demand dropped 11%, hurt by rising stock markets and stagnant prices. The WGC sees signs of a recovery in both jewelry and investment demand in the second half of the year, especially in China, where gold is expected to be bought as a hedge against yuan depreciation.

Demand for gold in the U.S. and Europe bucked the trend, rising 3% and 14%, respectively. And central banks continued to be net buyers, adding more than 137 tonnes to reserves in order to diversify against currency risk.

The other precious metals also finished lower, with silver sliding 0.5% while platinum and palladium dropped 0.5% and 1.2%, respectively.

At the Comex close: December gold slid $8 to 1,115.60; September silver lost 8 cents to $15.40; October platinum dropped $4.90 to $995; and September palladium surrendered $7.40 to $615.70 an ounce.