Gold bounces from lows despite HSBC price downgrade

Investing.com - Gold futures traded slightly higher Monday, bouncing from the lowest levels of the session, following the release of U.S. data on personal spending, while a price downgrade by HSBC Holdings accelerated losses. 

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,665.55 a troy ounce during U.S trade, gaining 0.06%.      

Gold futures were likely to find short-term support at USD1,623.95 a troy ounce, the low from April 23 and resistance at USD1,679.15, the high from April 13.

In a report, the Bureau of Economic Analysis said its seasonally adjusted core PCE price index advanced by 0.2% in March, in line with expectations, after rising by 0.1% in February.

The core PCE price index climbed at an annualized rate of 2.0% in March, matching expectations, after rising at a rate of 1.9% in the preceding month.

The Federal Reserve uses core PCE as a tool to help determine whether to raise or lower interest rates, with the aim of keeping inflation at a rate of 2% or below.

The report showed that personal spending rose 0.3% in March, below expectations for a 0.4% gain. Personal spending for February was revised to a 0.9% increase from a previously reported 0.8% gain.

Consumer spending is the single biggest source of U.S. economic growth, accounting for as much as two-thirds of economic activity. 

Personal income rose by 0.4% last month, beating expectations for a 0.3% gain, after rising by a revised 0.3% in February. 

The data came after Friday’s disappointing data on first-quarter U.S. economic growth, showing the U.S. economy expanded at a rate of 2.2% in the three months to March, below expectations for a 2.5% increase and slower than the 3.0% pace in the prior three months.

Market participants were shifting their focus to U.S. monthly jobs figures for April, to be released Friday.

Gold investors will be closely watching U.S. data in the second quarter for clues as to the likelihood of a fresh round of monetary easing.

Meanwhile, market participants noted that gold’s losses accelerated after HSBC Holdings lowered its 2012 average gold prices forecast to USD1,760 an ounce, down from a previous estimate of USD1,850.

The lender cited a "sharp decline" in Indian demand and reduced expectations for quantitative easing.

HSBC also cut its average gold price forecast for 2013 to USD1,775 a troy ounce.

A broadly stronger U.S. dollar further weighed on the precious metal, as the euro came under pressure after data released earlier confirmed that Spain’s economy slipped back in to a recession after contracting by 0.3% in the first three months of 2012.

The gloomy data came after Standard & Poor’s cut Spain’s long-term credit rating to BBB+ from A and gave it a negative outlook on Thursday, saying that the recession will undermine government efforts to reduce one of the largest budget deficits in the single currency bloc.

There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears Spain will be the next in the euro zone to require a bailout.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.2% to trade at 78.93, reversing losses of as much as 0.15%.

Elsewhere on the Comex, silver for July settlement gave back 1.20% to trade at USD31.03 a troy ounce, while copper for July delivery advanced 0.25% to trade at a three-month high of USD3.834 a pound.