Following an early pull back on profit taking, gold prices rose above US$1,510/oz as weak Chinese manufacturing data and negative developments in Europe’s debt crisis prompted traders to pour money into safe haven assets, primarily gold.
It was reported today that HSBC’s China purchasing managers index (PMI) fell from 51.8 in April to 51.1 in May, hitting the lowest level in nearly a year. The data added to concerns that China’s economic growth is slowing, which will in turn lead to a decline in energy demand.
More bad news came out of Europe over the weekend as Standard & Poor’s decided to cut its outlook on Italy’s debt from “stable” to “negative”. S&P commented that Italy’s growth prospects were weak and the country’s prospects for reducing its general government debt have diminished.
Last week, Fitch lowered Greece’s sovereign rating from BB= to B+.
Gold was held back by a surge in the US dollar amid weakness in the euro as a result of the downgrades. Gold is seen as an alternative asset to the US dollar and has an inverse relationship with the greenback.
Gold last traded at US$1,515/oz. Silver and platinum moved in the opposite direction, slipping to US$35.05/oz and US$1,750/oz respectively.
Gold climbs above 1500/ounce on European debt crisis
Published: 16:13 23 May 2011 BST