Gold Ends Lower As Equity Meltdown Fears Ease

(RTTNews) - Gold futures ended lower for a second straight session on Tuesday, amid easing anxiety of a possible stock market meltdown after China cut its benchmark interest rates to boost a faltering economy. The move encouraged investors back to equities with some bargain hunting evident in the process.

The Chines decision to lower interest rates helped bring stability to global equity markets and as well bolstered the U.S. dollar, following yesterday's massive declines in global equity markets over fears focused on the economic doldrums in China.

The Chinese authorities lowered interest rates overnight, hoping to jump start what was the world's fastest growing global economy. This helped equities snap back this morning after brutal losses in the previous session.

The interest rates were reduced by 0.25 percentage points each, the People's Bank of China said in a statement on its website.

Markets in Europe ended firmly in positive territory Tuesday, with the gains due partly to bargain-hunting following the steep losses in recent days. The U.S. markets are also trading higher, with bargain hunting contributing to the early strength on Wall Street after some steep losses in recent days.

Nonetheless, China's benchmark Shanghai Composite Index plunged 7.63 percent, following its 8.49 percent plunge yesterday.

The precious metal also reacted negatively to some upbeat economic data out of the U.S. with consumer confidence showing substantial improvement in August, rebounding from decline last month to a seven-month high.

Meanwhile, new home sales in in the U.S. also showed a notable rebound in July, after reporting a sharp drop in the previous month, a Commerce Department report said Tuesday.

Gold for December delivery, the most actively traded contract, fell $15.30 or 1.3 percent, to settle at $1,138.30 an ounce, on the Comex division of the New York Mercantile Exchange on Tuesday.

Gold for December delivery scaled an intraday high of $1,156.30 and a low of $1,134.00 an ounce.

On Monday, gold prices for December delivery dropped $6.00 or 0.5 percent, to settle at $1,153.60 an ounce, with investors tracking the massive declines in global equity markets, centered on another collapse in Chinese equities and with bloodbath on Wall Street too.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved up to 681.10 tons from its previous close of 677.83 tons on Monday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.50 on Tuesday, up from its previous close of 93.42 in late North American trade on Monday. The dollar scaled a high of 94.69 intraday and a low of 93.49.

The euro trended lower against the dollar at $1.1429 on Tuesday, as compared to its previous close of $1.1619 in North American trade late Monday. The euro scaled a high of $1.1624 intraday and a low of $1.1398.

On the economic front, China's central bank cut its key interest rates and reserve ratio in a surprise move on Tuesday, boosting efforts to support the slowing economy as the Chinese stock market fell steeply for a second straight day. The interest rates were reduced by 0.25 percentage points each, the People's Bank of China said in a statement on its website.

China's benchmark one-year lending rate was cut to 4.6 percent and the deposit rate was slashed to 1.75 percent. The new rates are effective from August 26. The ceiling on fixed deposits with tenure more than a year was also scrapped in sync with the deposit rate liberalization plan.

New home sales in in the U.S. showed a notable rebound in sales in July, with sales jumping to an annual rate of 507,000 in July, 5.4 percent above the revised June rate of 481,000. Economists expected new home sales to climb to a rate of 516,000 from the 482,000 originally reported for the previous month.

Consumer confidence in the U.S. has seen a substantial improvement in August, with the Board's consumer confidence index surging to 101.5 in August from 91.0 in July. The index had been expected to show a more modest increase to a reading of 94.0.

A leading economic index for China remained positive in July, the latest survey from the Conference Board showed on Tuesday, advancing 0.9 percent. That follows the downwardly revised 0.6 percent increase in June (originally up 1.0 percent) and the 1.1 percent jump in May.

German business confidence improved unexpectedly in August, reports said citing data from the Munich-based Ifo Institute on Tuesday. The Ifo Business Climate Index rose to 108.3 in August from 108 a month ago. It was forecast to fall to 107.6.

Germany's economic growth improved as initially estimated in the second quarter, driven by strong exports. Gross domestic product rose 0.4 percent quarter-on-quarter, faster than the 0.3 percent expansion seen in the first three months of the year, final data from Destatis showed Tuesday. The growth rate matched the preliminary estimate released on August 14.