Gold Edges Higher On Dollar Weakness

Gold prices rose slightly on Monday and the dollar weakened as risk sentiment improved following a reduction in the key interest rate by the People’s Bank of China.

Spot gold edged up 0.2 percent to $1,821.49 per ounce, while U.S. gold futures were up 0.2 percent at $1,820.95.

China’s central bank has reduced the rate on the one-year medium-term lending facility by 10 bps to 2.85 percent and injected liquidity worth 700 billion yuan via the MLF.

The interest rate on the seven-day reverse repurchase agreement was trimmed by 10 bps to 2.1 percent and pumped 100 billion yuan of liquidity into the banking system.

The rate cut, which was larger than expected, came in the wake of a downturn in the property sector and virus crisis.

China’s economy grew at a slower pace in the fourth quarter of 2021 amid weak property investment and new restrictions imposed at the end of the year to control the spread of coronavirus.

In the fourth quarter, gross domestic product grew 4.0 percent on a yearly basis, slower than the 4.9 percent expansion posted in the preceding quarter, data from the National Bureau of Statistics showed. However, the pace of growth was bigger than the economists’ forecast of 3.6 percent.

On a quarterly basis, GDP advanced 1.6 percent versus the expected growth of 1.1 percent.

In the whole year of 2021, the economy logged a strong growth of 8.1 percent, but this was mainly due to the low base effect.

Looking ahead, the Bank of Japan will conclude its two-day meeting on Tuesday. The bank is expected to keep its policy unchanged, but raise its inflation outlook.

Following the long holiday weekend, trading later this week may be impacted by reaction to U.S. reports on housing starts, existing home sales and regional manufacturing activity.

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