Gold price set for longest rally since October on Chinese rate cut

The price of gold has extended its rally to a fourth straight session so far in today’s trading. Earlier today, bullion managed to reach its highest point in nearly two weeks as China announced a second interest-rate cut in three months and the US reported a slower pace of economic expansion than previously anticipated.

Gold for immediate delivery had advanced about 0.4 percent, or $4.86, to $1,217.93 per ounce as of 08:45 GMT, to be trading about one percent below its 50-day simple moving average of $1,231.44. Bullion climbed to $1,223.11 in earlier trading, its highest level since 17 February. Should the precious metal end the session in positive territory, it would be the longest consecutive daily advance since October. According to FastMarkets analyst Will Adams:

“The precious metals are attempting to rebound with gold appearing to have put in a bit of a higher base early last week […] The fact gold is managing to edge higher despite the stronger dollar is noteworthy and encouraging.”
Bullion has found support on the back of an announcement over the weekend by The People’s Bank of China (PBoC) that the benchmark lending and deposit rates will be cut by a quarter percentage point. Bloomberg quoted Sun Yonggang, a strategist at Everbright Futures Co. as saying:

“The slowdown in China remains a huge risk to global growth, supporting demand for gold […] Gold received a boost from the latest US data, which suggests that growth may not be as strong as perceived.”
On Friday, the US Department of Commerce revised down its fourth-quarter GDP estimate. According to the preliminary report from the Washington-based agency, the US economy expanded at a 2.2 percent year-on-year rate, down from an initial estimate of 2.6 percent.
On the COMEX in New York, gold for April delivery had gained over four dollars, or about 0.3 percent, to $1,217.9 per ounce as of 08:54 GMT. Elsewhere, India, one of the largest consumers of precious metals, revealed a sovereign gold bond as an alternative to physical gold, as well as a new Gold deposit scheme to replace its existing ones, India’s finance minister Arun Jaitley said over the weekend as part of the FY15-16 Indian Budget.
The Bullion Desk cited ANZ Bank commodity strategist Victor Thianpiriya as saying that the measures taken to monetise gold are likely to have restrained short-term effect on demand. Longer-term “effect on gold imports and onshore premiums [is] dependent on the success of these measures”.

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