Gold Prices Rise along with China Central Bank Liquidity

Gold prices were up in Asia on Friday with the coming Chinese New Year expected to fuel physical demand. People’s Bank of China released almost CNY 2 trillion in extra liquidity during a day when prices data were stable.

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Additional support came from India, another key gold buyer, witnessing a boost on a lower tax rate for gold.

As well in China, consumer prices were up 0.6 percent. This was compared to an expected 0.7 percent gain seen on month for January and a 1.5 percent rise expected on year. Producer prices increased by 4.3 percent on year, meeting expectations.

Comex gold futures were at $1,319.80 per troy ounce, rising 0.06 percent.

In other precious metal trade, silver futures were up by 0.63 percent to $16.34 per troy ounce. Platinum futures on the other hand dropped to $974.70, falling 0.69 percent.

Copper fell as well, down 0.63 percent to $3.07, while natural gas was at $2.70, falling 0.26 percent.

Dollar Boosting Gold

Gold prices inched lower overnight on Thursday, reaching their lowest level in almost one month. The drag was due to expectations that more U.S. dollar interest rate hikes will happen this year.

The dollar fell from session highs as traders waited for the approval of a budget deal on Thursday to avoid a government shutdown.

Senator Rand Paul was holding up the Senate’s vote on a massive budget deal. The vote comes as opposition from both sides of the political isle continues. Both sides are debating rising concerns that the budget deal does nothing for young immigrants.

Another pressure on gold was the comments made by San Francisco Fed President John Williams. He said that the central bank will adopt a “steady, gradual” approach to rate increases.

Gold is extremely sensitive to rising U.S. interest rates. This is mostly because it also increases the opportunity cost of holding non-yielding bullion while boosting the dollar.

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