Gold Drops After Weak Chinese Report And Incomprehensive Euro Area Finance Ministers` Decisions

"McKinley and Hobart Gold Standard 1896" Ink Well (Photo credit: Cornell University Library)

Precious-Gold slipped on Tuesday trading after rebounding yesterday on worries after weak Chinese data and with some issues not tackled or detailed by the euro area finance ministers. The shiny metal found support at the critical level of $1580 an ounce yesterday to rise to a high of $1593.24 yet it retreated today to trade around $1584.36, where $1580 remains a critical support while resistance is expected to be seen at $1600. Data from China added to worries global recovery is faltering after a parade from downbeat figures from major global economies last week. China`s weaker than anticipated imports gave evidence demand is weak in the world`s second-biggest economy. However, gold may gain as an inflation hedge as the slowdown in growth along with the drop in inflation may prompt the Chinese central bank to ease monetary policy further to reinvigorate the economy. Moreover, the euro area finance ministers` meeting that took place in Brussels yesterday sparked some optimism after they agreed to provide Spain with a 100 billion euro bailout in direct cash for Spanish banks while granting the government an extra year till 2014 to its deficit reduction targets. Spain will receive a tranche of 30 billion euros by the July while the rest of the aid has not been finalized yet. The positive effect did not last long as worries increased once again as their discussions fall short of bailout terms for Greece and the mechanism to be taken in intervening in the bond markets to ease the surging bond yields in Spain and Italy. Regarding fundamentals, data from France showed a drop in industrial production by 1.9% in May from a revised of 1.4%, where manufacturing production slipped 1.0% from a revised of -0.9%. ... Continue to read.

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