Gold Ends Higher On China Data, Bargain Hunting

(RTTNews) - Gold futures ended higher for a second straight session Tuesday, mostly on bargain hunting with some disappointing inflation data out of China, even as the dollar strengthened against some major currencies. The week has been a minor comeback for gold, after having shed over 2 percent last Friday on some upbeat, better than expected jobs data from the U.S.

Chinese inflation accelerated more-than-expected on food prices in June. Nonetheless, the below-target inflation and negative producer price inflation underscore economic weakness, providing scope for policy actions.

Gold for August delivery, the most actively traded contract, gained $11.00 or 0.9 percent to close at $1,245.90 an ounce Tuesday on the Comex division of the New York Mercantile Exchange.

Gold for August delivery scaled an intraday high of $1,258.70 and a low of $1,232.00 an ounce.

Yesterday, gold rose nearly 2 percent with investors seeking a bargain after the precious metal dropped about three percent last session and the dollar declining against a basket of major currencies. Prices also found support with analyst Deutsche Bank indicating price corrections for gold to have peaked.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved down to 946.96 tons from 961.99 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 84.64 on Tuesday, up from 84.20 late Monday in North American trade. The dollar scaled a high of 84.75 intraday and a low of 84.09.

The euro traded lower against the dollar at $1.2785 on Tuesday, as compared to $1.2870 late Monday in North America. The euro scaled a high of $1.2902 intraday and a low of $1.2764.

In economic news, Industrial production in the U.K. remained flat in May from April, while manufacturing output fell unexpectedly by 0.8 percent, data from the Office for National Statistics revealed. Economists had forecast industrial output to grow 0.2 percent in May after falling 0.1 percent in April.

Meanwhile, the deficit in the U.K. goods trade for May widened slightly from the same month last year, data from the Office for National Statistics showed. The visible trade deficit for May was GBP 8.491 billion compared to GBP 8.1 billion a year ago. Economists were looking for a GBP 8.485 billion shortfall. In April, the deficit was GBP 8.430 billion.

In an update to its World Economic Outlook, Washington-based International Monetary Fund has forecast global economic growth at 3.1 percent this year, less than its April projection of 3.3 percent, but equaled last year's growth figure. In 2014, the world economy is expected to expand 3.8 percent, which is also slower than the 4 percent forecast in April.

The 2013 growth forecast for the U.S. was cut to 1.7 percent from 1.9 percent, and the outlook for next year was lowered to 2.7 percent from 3 percent. The 17-nation Eurozone is expected to shrink 0.6 percent this year, worse than the 0.3 percent contraction projected in April.