Gold Rallies to 3.5-Month High on Weak U.S. Data, Bullish Charts, Slumping U.S. Dollar

By Carolina Curiel (ScrapMonster Author)

October 15, 2015 03:48:01 AM

(Kitco News) - Gold prices ended the U.S. day session higher and scored a 3.5-month high Wednesday.

Downbeat U.S. retail sales and Federal Reserve data released today, bullish technical charts and a slumping U.S. dollar index all worked in favor of the precious metals bulls. Silver notched a four-month high Wednesday. December Comex gold was last up $20.00 at $1,185.40 an ounce. December Comex silver was last up $0.213 at $16.12 an ounce.

The key data points in the U.S. Wednesday were the retail sales report for September and the Fed’s beige book—both of which fell into the dovish U.S. monetary policy camp. Retail sales came in at up 0.1%. The overall sales figure was expected to be up 0.2% versus up 0.2% in August. Revisions to the previous months and other internals of the retail sales report were also disappointing. The Fed’s beige book, released in the afternoon, showed a weakening U.S. manufacturing sector. The negative readings provide further ammunition for the monetary policy doves, who want the Federal Reserve to hold off on raising interest rates until next year, at the earliest.

There were also reports overnight that consumer demand for gold in China has seen a significant increase lately.

The U.S. dollar index has been trending lower the past three-weeks and closed at a seven-week low close today. The flagging greenback is a bullish “outside market” force that has been working in favor of the precious metals bulls recently.

World stock markets were mostly weaker Wednesday, following some more downbeat economic news coming out of China, the world’s second-largest economy and the world’s leading raw commodity importer. China’s consumer price index rose 1.6% in September, year-on-year, compared to a rise of 2.0% in August. This data falls into the camp of market watchers that are worried about worldwide price deflation. Deflation is the archenemy of raw commodity and stock market bulls.

There was also disappointing economic news coming out of the European Union Wednesday. Industrial output in the Euro zone declined by 0.5% in August from July, and was up 0.9%, year-on-year. The numbers were in line with market expectations.

Courtesy: Kitco News