Mixed China Data Send Gold Prices Plunging
Gold prices plunged anew Thursday after a mixed bag of Chinese data cast further doubts about the world’s second-largest economy. A stronger dollar and delayed U.S.-China trade negotiations also added to the pressure.
Precious Metals Plunge
Gold and silver prices declined sharply overnight and extended their losses into North American trading. Gold for April delivery fell $13.30, or 1%, to $1,296.00 a troy ounce on the Comex division of the New York Mercantile Exchange. The selloff snapped a two-day accumulation phase that saw gold prices climb $18.
Silver futures dropped 30 cents, or 1.9%, to $15.16 a troy ounce. Silver’s discount to gold grew to 85.5 ounces. This means 85.5 ounces of silver are needed to purchase one ounce of gold at today’s prices. This ratio was below 82.00 at the start of 2019.
A stronger U.S. dollar pressured commodity prices on Thursday as the greenback looked poised to snap a four-day losing streak. The dollar index (DXY), a broad performance measure of the greenback against six rival currencies, rose 0.2% to 96.76. The dollar and precious metals are inversely correlated most of the time.
China Roils Markets
Precious metals plunged after China, the world’s second largest economy, reported a bigger than expected slowdown in industrial production. Industrial production rose just 5.3% year-over-year, down from 5.7% in December and below the 5.5% growth clip forecast by analysts, the National Bureau of Statistics reported Thursday.
Other measures of economic health improved in January but remained well below levels investors have grown accustomed to over the years. Retail sales grew 8.2% year-over-year, unchanged from January. Annual year-to-date fixed-asset investment rose 6.1% in February, up from 5.9% in January.
China’s economy has been cooling for the past five years as Beijing shifted its industrial policy to favor consumer spending and services. The trade war with the United States has accelerated the downtrend, with gross domestic product and foreign direct investment affected. Now, it appears that the U.S. and China won’t return to the negotiating table until at least April. Last month, The Wall Street Journal reported that a comprehensive deal looked imminent but no further updates have been provided.
Some of the biggest barriers to a new trade agreement include intellectual property protection for U.S. firms and fairer access to Chinese markets.
Featured image courtesy of Shutterstock. Chart via Barchart.com.