Gold struggles during us uncertainty

Photo: Investingold

Figures this week showed that American GDP grew just 0.2 per cent in the first quarter of 2015, far below its forecast growth. While precious metals tend to prosper during times of wider financial uncertainty, though, gold has struggled.

The metal rose 1 per cent on Tuesday ahead of the Federal Reserve meeting to discuss potential interest rate hikes. This increase was triggered by data that showed that consumer confidence in the US has fallen in April to its lowest level since December.

Indeed, gold prices rose by as much as 10 per cent between December and January 2015. That growth, though, has met headwind, as the US dollar enjoys strong growth against other major currencies.

The GPD data hit the dollar hard this week, causing it to fall against the euro to a two-month low. However, the Federal Reserve's insistence that any slowdown was temporary and the economy would rebound was backed up by data from the Labor Department, which showed that claims for unemployment benefits had fallen to a 15-year low.

"The weekly claims are the most immediate data available on a regular basis on the condition of the job market," Tai Wong, director of commodity products trading at BMO Capital Markets Corp., told Bloomberg. "Gold is just getting spanked."

In the following 24 hours, gold for immediate delivery fell 1.7 per cent to $1,184.37 an ounce, according to Bloomberg's figures, which equates to the biggest drop recorded since 6th March 2015.

Demand from China for physical gold also declined, with imports from Hong Kong sinking to a seven-month low of 66.4 tonnes in March, according to Commerzbank. Net imports fell 27 per cent year-on-year in the quarter, as China's improving stock market makes the precious metal less attractive.