Gold up on stimulus hopes after weak Chinese data

Fri Aug 10, 2012 3:54pm EDT
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By Frank Tang

NEW YORK (Reuters) - Gold rose on Friday and also posted a weekly gain, as disappointing Chinese trade and new bank-lending data suggested policymakers there may act to boost sputtering growth.

Worries about food inflation also boosted gold after the U.S. government said the worst drought in more than half a century has battered corn and soybean crops in the world's main agricultural exporter with larger losses than expected.

Bullion broke ranks with declining U.S. equities after the latest disappointing Chinese data showed July exports rose just 1 percent from a year ago, with new loans at a 10-month low.

"Gold is up mainly because of the weak manufacturing numbers in China, suggesting that there is a pretty strong indication we are going to see more quantitative easing there," said Jeffrey Sica, chief investment officer at SICA Wealth Management, which has more than $1 billion in assets.

Spot gold rose 0.2 percent to $1,620.60 an ounce by 2:43 p.m. EDT (1843 GMT), rebounding from a low from earlier in the session at $1,605.20.

The metal posted a weekly gain of 1 percent largely on hopes for stimulus measures by China based on weak economic data.

U.S. gold for December settled up $2.60 at $1,622.80 an ounce.

Trading volume totaled around 111,000 lots, about 30 percent below its 30-day average, but still the highest this week, preliminary Reuters data showed.   Continued...

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh April 11, 2012. REUTERS/Ajay Verma