Gold Rises on Signs of China Weakness

Gold prices continued upward on Thursday after grim revenue guidance from Apple Inc. shined the spotlight on China’s ongoing growth woes. The iPhone maker slashed its quarterly revenue forecast for the first time in more than 15 years and said the decline was entirely attributed to weak demand from the world’s second-largest economy.

Gold Aims for $1,300

The price of bullion notched a new six-and-a-half month high of $1,294.30 a troy ounce, moving closer to the all-important $1,300 level. At the time of writing, gold’s February contract was up $6.70, or 0.5%, at $1,290.80 a troy ounce on the Comex division of the New York Mercantile Exchange.

The yellow metal has gained more than 7% since mid-November, a period marked by extreme swings in stock prices. The S&P 500 Index officially entered bear-market territory last month, highlighting the extent of the market turmoil since October.

This environment has also benefited silver, which is currently trading at more than four-month highs. Silver’s March contract rose 7 cents, or 0.4%, to $15.72 a troy ounce.

Precious metals were aided by a sharp drop in the U.S. dollar. The U.S. dollar index (DXY) declined 0.5% to 96.31. A weaker dollar makes greenback-denominated assets like gold and silver more attractive for foreign buyers.

Apple Shines the Spotlight on China

Apple’s CEO Tim Cook issued a letter on Wednesday explaining why his company will badly miss its quarterly revenue forecast. In the letter, Cook attributed the slowdown in sales to a badly performing Chinese market, which is currently grappling with weak consumer demand and an uncertain trade outlook.

“Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall,” Cook said.

Apple’s share price has taken a beating on Thursday, falling more than 9% in New York trade. Since peaking at more than $1 trillion, Apple’s market cap has fallen more than $300 billion.

China’s economic slowdown has major implications on global markets. The country’s central bank has enacted new policies to stimulate business lending but has instead fueled unprecedented bubbles in housing and government bonds.

Beijing announced several years ago that it would like to transition its economy away from exports and traditional smokestack industries toward consumption. However, government data last month showed the slowest pace of retail sales growth in 15 years. At the same time, separate PMI reports released this week confirmed that the country’s manufacturing sector contracted in December, leaving the economy bruised on several fronts.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi