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Gold Trades Flat on Weak US Data

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Updated

Gold buoyed

Gold stood strong in January 2016. Chinese market turbulence, further driven by tensions in the Middle East, brought the haven appeal of gold to its peak. Early in the week ended January 29, 2016, gold touched a high of $1,128.7 per ounce. However, it closed almost flat on Thursday, January 28, at $1,116.1 per ounce.

The recent FOMC (Federal Open Market Committee) policy-setting meeting fanned gold further, as a rate hike seemed far off. However, the Fed maintained that it would still keep the gradual pace of lifting interest rates.

Economic data on US durable goods posted their biggest drop in 16 months in December 2015. The core durable goods order, which indicates the change in the total value of new purchase orders placed with manufacturers for durable goods, saw a drop of 1.2%. However, only a drop of 0.1% was expected. 

Most mining-based investments saw a downturn on January 28, 2016. The Global X Silver Miners ETF (SIL) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) fell 0.52% and 2.1%, respectively, on the day.

Mining-based stocks such as Buenaventura (BVN), Hecla Mining (HL), and Eldorado Gold (EGO) fell 5.8%, 6.9%, and 3.5%, respectively, on the same day. These three stocks together make up 11.9% of the price changes in the VanEck Vectors Gold Miners ETF (GDX). GDX fell 2.4% on January 28.

The two most important factors creating an impact on gold in the current month are Chinese currency devaluation and the Fed’s decision on raising the interest rates.

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