Upbeat China GDP Sends Gold to Multi-Month Lows

Gold is losing earlier gains and turned negative on Wednesday as investors welcomed news of a better than expected GDP in China, with almost all components showing green signals.

Cooper is testing a significant resistance at 2.9590, while Silver remains in range.

DXY is down on the day too, that’s why gold posted gains at the beginning of the trading day, but the news from China overpassed all other things, and risk appetite is now dominating markets.

China surprises market with a strong GDP reading

The Gross Domestic Product in China growth 6.4% in the Q1 2019 from the same period of 2018. A better than expected number considering the 6.3% the market anticipated.

Quarter on quarter, Chineses GDP rose 1.4%, in line of expectations.

In a recent note, Iris Pang, economist at ING, highlighted the consumer role in the GDP reading, “the official statement claims that consumption was the main economic engine, contributing more than 65% of the growth.”

It suggests that China is also developing its internal market. Thought the government is inside an expansionary monetary cycle to fuel domestic consumption. Pang also highlights that consumption’s “contribution to GDP has fallen from 79% in 4Q.”

On the other hand, “retail sales grew faster in 1Q, at 8.7% YoY. And while that’s up from 8.2% in 4Q, it is lower than our forecast of 8.9%,” she comments.

IG Markets analyst Kyle Rodda said to CNBC that “with the data that we’ve got, it certainly adds a bit of a downside to gold from here.” Especially after breaking the 1,280 level.

Gold down to 2019 lows amid risk appetite

Gold is trading negatively for the fifth day in a row as investors welcomed news from China and its upbeat GDP.

Since its peak on April 10 at 1,310, gold has lost 2.6% of value to current lows around 1,270. Almost $40 in just five days.

XAU/USD is now trading in consolidation mode around 1,275, 0.07% negative on the day, after trading as low as 1,270 on Tuesday.

On Tuesday, the metal broke below the significant support located at 1,280, and it opened the door to 1,250 level, where the 200-day moving average is.

Technical indicators suggest more room to the downside. The metal is showing oversold levels.

To the upside, the metal needs to recover above the 1,280 area first to show that bears are not in full control. However, the pair is still contained by the 1,310 area.

Silver remains in range

Silver is trading sideways on Wednesday as the unit is trapped in a small range between 14.90 and 15.10. The pair is consolidating levels just above the 15.00 area at these moments.

Technical indicators suggest that the pair doesn’t have enough strength to recover, but bulls are defending the 15.00 area.

However, XAG/USD will need a close above the 15.10 to give some hopes to the bulls; and then, a break above the 15.35 level to show a recovery mood.

To the downside, if the pair manages to break below the 14.90 area, it will open the door for a test to the 14.50 area.