Senior refinery technician Vincente Sandoval puts a gold ‘button’ into a furnace to be further refined to form gold doré bars at Newmont Mining’s Carlin gold mine operation near Elko, Nevada, the US. Picture: REUTERS/RICK WILKING
Senior refinery technician Vincente Sandoval puts a gold ‘button’ into a furnace to be further refined to form gold doré bars at Newmont Mining’s Carlin gold mine operation near Elko, Nevada, the US. Picture: REUTERS/RICK WILKING

Bengaluru — Gold prices stayed below the key $1,280 level on Wednesday, near a four-month trough, as better-than-expected economic readings from China lifted Asian shares and sharpened risk appetite, denting the metal’s safe-haven appeal.

Spot gold was steady at $1,276.36/oz as of 3.24am GMT, after having fallen as much as 1.2% to $1,272.70, its lowest since December 27, in the previous session.

US gold futures were up 0.1% to $1,278.80/oz.

China’s pace of economic growth in the first quarter remained steady at 6.4%, beating expectations of a growth rate of 6.3%, helped by a sharply higher factory production.

The data, which signalled that Beijing’s recent stimulus drive might be paying off, swung Asian shares higher.

“With the [Chinese] data that we’ve got, it certainly adds a bit of a downside to gold from here,” said IG Markets analyst Kyle Rodda.

“The fact that we have broken below the key $1,280 level might make it difficult for prices to recover.”

The metal has fallen by more than 5% since its February high of $1,346.73/oz and is trading below its 50- and 100-day moving averages, which, analysts say is a sign of further weakness.

“Signs of progress in US-China trade negotiations and strong US economic data have further bolstered risk appetites since the start of the second quarter,” Phillip Futures said in a note.

“The precious metal looks poised to undergo a bearish correction amidst growing downside risks in the near term,” the note added.

Gold, a nonyielding asset for investors looking to hedge against times of economic and political uncertainty, loses appeal when interest-yielding equities rise.

A gauge of investors’ interest in the metal, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell to a near six-month low to 752.27 tons on Tuesday.

Elsewhere, silver gained 0.2% to $15/oz.

Spot platinum rose 0.3%, to $879.50/oz, while palladium climbed 0.4% to $1,355.46.

The recent weakness in palladium prices was instigated by a conjunction of profit-taking and poor car sales data in China and the US, Metals Focus said in a note on Tuesday.

However, analysts at Standard Chartered expect supply deficit which had earlier pushed the metal to a record high of $1,620.53 last month, to deepen through this year and in 2020.

Reuters