Gold falls as the dollar rallies on China’s weak economic data and unexpected rate cut
- The price of gold dropped as much as 1.6% Monday while the dollar climbed amid downbeat economic data from China.
- The key metal had notched four consecutive weeks of gains before the decline.
- In a surprise move, Beijing slashed interest rates as the nation’s economic activity continues to fall short of expectations.
Following downbeat economic data and a surprise rate cut from China, gold dropped as the dollar climbed on Monday.
Before, the key metal had seen four consecutive weeks of gains before losing as much as 1.6% to open the current week. Gold futures expiring in December moved below $1,800 an ounce for the first time in a week, according to FactSet data.
At the same time, the greenback inched 0.45% higher, and the ICE US Dollar Index, a gauge of the dollar’s strength against a basket of currencies, moved up 0.6% after it had hit its lowest level in a month last week.
In recent weeks, cooling inflation had helped boost gold, a traditional safe-haven investment. However, Beijing’s economic data release Monday showed the world’s largest gold consumer is faltering amid more COVID-19 lockdowns and a worsening property situation.
New numbers showed China missed economists’ estimates on July retail sales, investments, and industrial output. Notably, the nation’s surveyed jobless rate for people between 16 to 24 hit a record-high 19.9%, and with the other data, signaled a worsening confidence and outlook among Chinese investors.
The People’s Bank of China cut the main on short-term liquidity to banks to 2% from 2.1% to 2% as well as its one-year lending facility rate to 2.75% from 2.85%. China’s offshore yuan and bond yields slipped.
Economists have pulled back China’s growth forecast for the rest of the year to 4%, according to Bloomberg.