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Gold Rises on China's Economic Growth

Written By Brian Hicks

Posted July 16, 2012

China recently reported that despite a slowdown, its economic growth was stronger than expected. The news spurred gold to a 1.5 percent jump on Friday as equities and commodities rose. This rise represented the biggest single-day uptick in three weeks.

The continuing economic problems of Europe and the U.S. had convinced many economists and analysts to predict worse performance for China. Although the nation’s growth rate slowed to its weakest in three years over six consecutive quarters, it was still stronger than anticipated, with year-on-year growth at 7.6 percent for the second quarter.

Bullion is especially sensitive to slight fluctuations in the policies issued by various central banks, and some predict that the numbers from China could lead to financial easing.

Reuters reports:

“It does indicate that the People’s Bank of China has to promote more liquidity via further rate cuts or potential fiscal programs that make sure growth does not fall below these levels,” said Mark Luschini, chief investment strategist at broker-dealer Janney Montgomery Scott, which has $54 billion in assets.

U.S. gold futures for August rose up to $1,592, a change of $26.70 an ounce. Spot gold hit $1589.63, a rise of 1.2 percent.

Over this year, gold has usually moved in synchronization with movements in risky assets.

Wall Street rallied around 2 percent and gains were noted in crude oil and grains. Consumer confidence fell again, which helped gold’s rise.

In early July, domestic consumer sentiment was at its lowest level in the past seven months. It is possible that the Fed may undertake further easing procedures, though nothing has been announced.