Gold Climbs as Slower Chinese Inflation Fuels Stimulus Optimism

Gold prices jumped higher on Thursday after reports of slowing Chinese inflation and an expectation of rising US jobless claims. This caused optimism that central banks might take steps to stimulate the economy. Gold rose .2% to its one-week high of $1,615 an ounce.

By Maria Kolesnikova and Phoebe Sedgman
Aug 9, 2012 1:28 AM MT
Bloomberg

Gold reached a one-week high in London on slowing Chinese inflation and expectations that a report may show rising U.S. jobless claims, boosting optimism central banks might take steps to bolster the global economy.

Growth in China’s industrial production also cooled in July, and central banks in Japan and South Korea saw little sign of price pressures, underscoring the scope for monetary stimulus should the European debt crisis deepen. Weekly U.S. jobless claims rose to 370,000, according to a Bloomberg News survey of economists before the Labor Department issues the figure today.

“Any relaxation of monetary policy is likely to be very positive for gold,” said Saeed Amen, an analyst at Nomura International Plc in London. “Gold isn’t fully pricing in further easing.”

Bullion for immediate delivery gained 0.2 percent to $1,615.19 an ounce by 8:58 a.m. in London. Prices reached $1,618.80, the highest level since July 31. December-delivery gold rose 0.1 percent to $1,617.70 on the Comex in New York.

“There is still QE thinking in the background of gold prices,” said David Lennox, a resource analyst at Fat Prophets in Sydney, referring to quantitative easing. “It won’t go away until we see the U.S. in full recovery mode. That’s certainly not happening at the moment.”

The Federal Reserve said Aug. 1 it would add stimulus if necessary to boost growth and cut an unemployment rate that has been 8 percent or higher for more than three years.

Consumer prices in China rose 1.8 percent from a year earlier, the lowest rate since January 2010, said the National Bureau of Statistics. Retail sales weakened and growth in industrial production was below 10 percent for a fourth month and at the lowest level since 2009, data showed.

Holdings in exchange-traded products backed by gold gained 0.3 percent to 2,411.7 metric tons yesterday, the highest since July 6, according to data compiled by Bloomberg.

Silver for immediate delivery added 0.4 percent to $28.1563 an ounce. Platinum climbed 0.5 percent to $1,416.12 an ounce, the highest since Aug. 3. Palladium rose 0.5 percent to $590.08 an ounce, the highest since Aug. 1.

To contact the reporters on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net; Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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