Gold Ends Sharply Higher On Weak Dollar, Soft Data

(RTTNews) - Gold futures surged to end at a six-week high on Wednesday, as the dollar continued to weaken after some soft economic data from the U.S. with April retail sales coming in weaker than expected, fueling speculations the Fed Reserve would delay its interest rate hike plans.

In a sign of continued weakness in the retail sector, a Commerce Department report on Wednesday showed U.S. retail sales to have come in unexpectedly flat in April. Retail sales were virtually unchanged in April following an upwardly revised 1.1 percent increase in March. Economists expected retail sales to edge up by 0.2 percent compared to the 0.9 percent growth originally reported for the previous month.

Gold moved higher, extending modest weekly gains as the dollar continued to weaken against the euro. Encouraging economic news out Europe saw diminished appetite for the dollar, giving gold a significant lift.

Prices have held in a stubborn range mostly below $1200 for the past few months, with traders unsure about the outlook for U.S. interest rates. A rate hike this summer could drive gold prices lower as the precious metal will lose its inflation hedge appeal.

Gold for June delivery, the most actively traded contract, jumped $25.80 or 2.2 percent to settle at $1,218.20 an ounce, on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for June delivery scaled an intraday high of $1,218.50 and a low of $1,190.40 an ounce.

On Tuesday, gold futures gained $9.40 or 0.8 percent to settle at $1,192.40 an ounce, on a weak dollar with investors seeking the precious metal's safe haven as continued sell-off in global treasury bonds weighed on markets.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 728.32 tons on Wednesday from its previous close.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 93.58 on Wednesday, down from its previous close of 94.56 on Tuesday in late North American trade. The dollar scaled a high of 94.59 intraday and a low of 93.46.

The euro trended higher against the dollar at $1.1362 on Wednesday, as compared to its previous close of $1.1214 in North American trade late Tuesday. The euro scaled a high of $1.1384 intraday and a low of $1.1205.

On the economic front, a Labor Department report on Wednesday showed an unexpected drop in U.S. import prices in April, with falling non-fuel prices more than offsetting higher fuel prices. Import prices fell by 0.3 percent in April following a revised 0.2 percent decrease in March. Economists had expected import prices to climb by 0.4 percent.

U.S. export prices dropped by 0.7 percent in April after inching up by 0.1 percent in the previous month. Export prices were expected to show an uptick of 0.1 percent.

A Commerce Department report showed a modest increase in U.S. business inventories in March, with the uptick short of economist estimates. Business inventories inched up by 0.1 percent in March after edging up by a downwardly revised 0.2 percent in February. Economists expected inventories to rise by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

China's industrial production grew at a faster pace in April, while retail sales growth eased for the third straight month, data from the National Bureau of Statistics showed Wednesday.

Industrial output expanded 5.9 percent year-on-year in April, faster than March's 5.6 percent increase. Nonetheless, it was slightly weaker than a 6 percent rise forecast by economists.

Annual growth in retail sales slowed to 10 percent in April from 10.2 percent in March. The annual growth rate slowed for the third straight month and came in below the expected increase of 10.4 percent.

Eurozone economic growth improved as expected in the first quarter as growth in France and Spain accelerated and Italy expanded, offsetting the weak performance of Germany.

Gross domestic product of the 19-nation bloc expanded 0.4 percent sequentially in the first quarter, slightly faster than the 0.3 percent growth seen in the fourth quarter of 2014, flash estimates published by Eurostat showed Wednesday. The growth rate matched economists' expectations.

The German economy grew at a slower pace in the first quarter of the year, data released by Destatis showed Wednesday. Gross domestic product rose 0.3 percent sequentially, slower than the 0.7 percent expansion seen a quarter ago. It was also weaker than the 0.5 percent growth forecast by economists.

The French economic growth accelerated at a faster-than-expected pace in the first quarter, the statistical office Insee showed Wednesday. Gross domestic product grew 0.6 percent in the three months ended March, exceeding economists' expectations for a 0.4 percent climb, after showing no variations in the previous quarter.

French consumer prices increased in April after falling for three straight months, the statistical office Insee reported Wednesday. Consumer prices rose 0.1 percent from last year, reversing March's 0.1 percent fall. The annual rate came in line with expectations.

Germany's consumer price inflation accelerated for the third straight month in April at a faster than initially estimated pace, final data from Destatis showed Wednesday. The consumer price index climbed 0.5 percent year-over-year in April, revised from a 0.4 percent increase estimated earlier. In March prices had risen 0.3 percent.

U.K. unemployment declined to the lowest since 2008 during the first quarter of 2015 and earnings increased more than expected, data from the Office for National Statistics revealed Wednesday. The ILO jobless rate came in at 5.5 percent during January to March period compared to 5.7 percent in October to December quarter. The rate came in line with expectations. This was the lowest since 2008.