Gold is currently trading at a $1185 an ounce, a 3 month high. On Wednesday, U.S retail sales figures were flat and producer prices recorded their largest decline in 8 months. With weak recent U.S. data which has been prevalent over the last couple of weeks starting with the poor employment report, an interest rate rise is unlikely in 2015 and gold has benefited from the recent poor U.S. economic data. Gold, as a non-yielding asset tends to benefit from very low interest rates.
Bullion has also benefited from the weakness in the U.S. dollar over the last few weeks. The U.S. dollar has hovered around seven-week lows against a basket of currencies paring some of its gains for 2015.
The price of the yellow metal has also been boosted by weak economic data from China. Physical demand for gold has been rising in China in recent weeks. One of the largest gold retailers in China, Chow Tai Fook said that its sales of gold products in the country rose 22% in the three months to end of September. The recovery in jewellery demand in China and constrained global gold supplies have given a boost to gold’s price outlook.
The surge in Chinese demand is likely to be supported by strong Indian demand over the next month because of a series of Hindu festivals, when it is considered auspicious to buy gold. India and China together account for approximately 50% of global physical demand for gold.
Gold has recovered approximately $100 an ounce since the end of July when it was trading at around $1085 an ounce. With the global outlook for the world economy weak and interest rate rises being delayed, the price of gold should continue its recent recovery.