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Gold Down but off 2019 Low; Some See $1,400 by Year-End

By Barani Krishnan

Investing.com - The roof isn't falling in on China yet. At least not in the way gold bugs had hoped. But the dollar isn't reaching towering heights, so that's working out for the yellow metal.

Bullion and gold futures were down again on Wednesday, but steadied after a two-day selloff that took the market to 2019 lows, with analysts saying the precious metal had as much chance of recovering in coming days as continuing with its recent rut due to mixed fundamentals.

Spot gold, reflective of trades in bullion, was down $3.03, or 0.24%, at $1,273.82 per ounce by 3:19 PM ET (19:19 GMT).

Gold futures for June delivery, traded on the Comex division of the New York Mercantile Exchange, settled the official session down just 40 cents, or 0.03%, to $1.276.80 per ounce.

Gold fell earlier in the session on data showing China’s economic growth in the first quarter at 6.4% year over year versus market expectations for a 6.3% expansion.

“The pretty good Chinese data implies the concerns of a slowdown in global growth have been mitigated to a great extent, which should elevate risk appetite,” Bart Melek, head of commodity strategies at TD Securities, told Reuters.

But gold managed to erase most of its losses as the dollar eased from its session highs later. The dollar index, which measures the greenback against a basket of six currencies, was flat at around 96.65 in post-settlement trade versus its intraday peak of 96.79.

The consensus for gold, if any, was a clouded outlook for now.

"We are still range-bound awaiting new headlines about U.S. politics and economics," said George Gero, precious metals analyst at RBC Wealth Management in New York.

"It's also a holiday-shortened week with limited audience," Gero added.

Some are more optimistic, though.

Capital Economics predicts $1,400 per ounce before the end of 2019, saying risk aversion will return to global markets and spur safe-haven demand in North American and European gold ETFs.

"A dovish turn by central banks and stimulus in China will not be enough to boost world GDP growth from its current slow pace of below 3% this year," the London-based markets researcher said.

“Global growth (could) stay weak for longer than most expect," it said, adding that the Chinese stimulus was also unlikely to generate the strong rebound in emerging markets that many investors seemed to assume.

Despite its bright rest-of-the-year outlook for gold, Capital Economics said headwinds could be back in the precious metal's path by next year and beyond.

"The improvement in risk appetite will work against gold in 2020 and 2021. We forecast the price of gold to reach $1,400 per ounce by the end of 2019 before slipping to $1,350 and $1,250 at end-2020 and end-2021 respectively."

Palladium rose after a fourth-day slide, retaining its position as the world's priciest traded metal. Spot palladium was up $42.80, or 3.2%, at $1,397.25 an ounce.

Trades in other Comex metals as of 3:19 PM ET (19:19 GMT):

Palladium futures up $48.95, or 3.7%, at $1,377.35 per ounce.

Platinum futures up $8.90, or 1%, at $893.10 per ounce.

Silver futures up 1 cent, or 0.1%, at $14.93 per ounce.

Copper futures up 3.5 cents, or 1.2%, at $2.97 per pound.

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