Gold prices flat in Asia after reserve ratio cut by China, copper gains

April 19, 2015

Singapore (Apr 20)  Gold was flat in early Asia on Monday after China at the weekend moved aggressively to ease monetary policy in the wake of data last week that pointed to lackluster economic performance by the standards of the Middle Kingdom.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery fell 0.01% to $1,203.70 a troy ounce.

Elsewhere on the Comex, silver futures for May delivery gained 0.23% to $16.267 a troy ounce. Also in metals trading, copper for May delivery jumped 0.96% to $2.818a pound.

At the weekend, China's central bank announced over the weekend that it lowered the amount of deposits it requires banks to hold as reserves to 18.5% from 19.5% effective April 20 in a surprise decision.

The move came after official data showed that China’s economy grew 7.0% in the first quarter, the slowest pace of growth since the global financial crisis in 2008.

Data on industrial production, retail sales and fixed asset investment also fell short of forecasts, indicating that China needs to act to prevent a further slowdown in the economy.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Also on Monday, New Zealand reported that first quarter consumer prices fell 0.3% quarter-on-quarter, more than the 0.2% drop seen.

Last week, gold prices ended above the $1,200-level on Friday, as traders continued to mull the timing of a Federal Reserve rate hike to gauge the appeal of the precious metal.

The Labor Department reported Friday that U.S. inflation edged up 0.2% last month, matching a similar gain in February. On a year-over-year basis, consumer prices dipped 0.1% in March after remaining flat in February.

Core consumer prices, which exclude food and energy costs increased 0.2% in March for an annual increase of 1.8%, the largest since October.

The report came after data earlier in the week showed that U.S. retail sales for March came in below expectations. Another report, showing a larger-than-forecast drop in industrial output pointed to a slowdown the first quarter.

Gold prices have been well-supported in recent weeks amid speculation the Fed could delay hiking interest rates until late 2015, instead of tightening midyear, after a recent run of soft economic data dampened optimism on the recovery.

A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.

In the week ahead, investors will be looking ahead to reports on the U.S. housing sector and data on durable goods orders for further indications on the strength of the recovery.

Meanwhile, uncertainty over Greece’s bailout negotiations with its creditors remained in focus ahead of Monday's deadline.


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