Gold Ends Sharply Higher On Soft Data, Weak Dollar

(RTTNews) - Gold futures moved up for an eighth day in a row to end at a 3-1/2-month high Friday, on some mixed economic data with industrial production declining in the U.S. and increased physical demand from China. The precious metal also found support with the dollar weakening against a basket of major currencies, making gold attractive to buyers holding other currencies.

Gold prices have risen sharply this week amid renewed expectations that the Federal Reserve will maintain ultra-low interest rates through next year.

Gold added 4.4 percent for the week.

On the economic front, a Thomson Reuters and the University of Michigan report on Friday showed consumer sentiment to have unexpectedly held steady in February, after reporting a drop in the previous month. As well, industrial production in the U.S. unexpectedly declined in January, with severe freezing weather curtailing manufacturing production in some regions of the country.

Meanwhile, import prices in the U.S. unexpectedly saw a modest increase in January, reflecting a rebound in prices for non-fuel imports, a report from the Labor Department showed.

Chinese inflation remained unchanged at the lowest level since last May in January, as the underlying price pressures were subdued, giving leeway for the central bank to loosen policy to kick start a faster recovery.

Euro area economic growth accelerated more-than-expected in the fourth quarter, gaining strength from almost all major economies in the currency bloc and reduced pressure on the central bank to take any immediate remedial measures to cushion growth and counteract slowing inflation.

Gold for April delivery, the most actively traded contract, gained $18.50 or 1.4 percent to close at $1,318.60 an ounce on the Comex division of the New York Mercantile Exchange on Friday. It was the highest close for gold futures since October 31, 2013.

Gold for April delivery scaled an intraday high of $1,321.50 and a low of $1,299.90 an ounce.

Yesterday, gold ended higher after some disappointing macroeconomic data out of the U.S. with retail sales dropping in January and initial claims for unemployment benefits increasing more than expected.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved up to 806.35 tons (25.925 million ounces) from 798.85 tons previously.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.15 on Friday, down from its previous close of 80.29 late Thursday in North American trade. The dollar scaled a high of 80.33 intraday and a low of 80.07.

The euro traded higher against the dollar at $1.3695 on Friday, as compared to its previous close of $1.3680 late Thursday in North America. The euro scaled a high of $1.3714 intraday and a low of $1.3674.

In economic news, the Thomson Reuters and the University of Michigan report showed preliminary reading on the consumer sentiment index for February at 81.2, unchanged from the final January reading. Economists expected the index to drop to a reading of 80.2.

A Federal Reserve report showed Industrial production in the U.S. fell 0.3 percent in January after rising 0.3 percent in December. Economists expected production to increase by 0.3 percent. The unexpected drop in industrial production was partly due to the weather-related weakness in the manufacturing sector. Manufacturing production dropped 0.8 percent in January following a downwardly revised 0.3 percent increase in the previous month.

A Labor Department report showed import prices in the U.S. inched up 0.1 percent in January following a revised 0.2 percent increase in December. Economists expected import prices to edge down 0.1 percent compared to the unchanged reading originally reported the previous month. The uptick was due to a rebound in prices for non-fuel imports, which rose 0.3 percent in January after dipping by 0.1 percent in December. Export prices rose 0.2 percent in January after climbing 0.4 percent in December, with economists anticipating prices to move up by 0.1 percent.

Reflecting moderating demand in global commodity markets, producer prices in China extended its decline for the 23rd month, data from the National Bureau of Statistics showed Friday. Consumer prices were up 2.5 percent in January from the prior year, the same rate of growth as seen in December, but slightly above the 2.4 percent rise forecast by economists.

Gross domestic product in the euro area grew 0.3 percent sequentially, which was faster than the 0.1 percent rise posted in the third quarter, flash estimates from Eurostat showed Friday. The rate was also above the 0.2 percent forecast by economists. The economy expanded for the third successive quarter at the end of 2013, following six quarters of contraction. On a yearly comparison, GDP rose 0.5 percent, reversing the 0.3 percent decline in the third quarter.