Gold futures edged higher Wednesday, but gains were modest as the market came off a sharp decline in the previous session.
Gold for December delivery GCZ3 +0.08% was up $1.20, or 0.1%, at $1,321.60 an ounce in electronic trading.
On Tuesday, gold futures dropped $13.70, or 1%, on the Comex division of the New York Mercantile Exchange. The move ended a four-day winning streak and came as the U.S. dollar DXY -0.02% extended gains against major rivals after a mixed U.S. July retail sales report.
Gold prices have benefitted from monetary stimulus from the Federal Reserve and other central banks, but improvement in the U.S. economy is seen as drawing the Fed closer to slowing the pace of its asset purchases from $85 billion a month.
Retail sales last month rose 0.2%, missing a MarketWatch consensus estimate of a 0.3% increase. But some details of the report were stronger than anticipated, including sales growth of 0.5% excluding purchases of motor vehicles.
“U.S. consumers are continuing to increase overall spending at a rate consistent with moderate growth. With the likelihood that fiscal drag will be reduced over coming months, this sets up for improved overall growth in the U.S. next year,” said CMC Markets chief market analyst Ric Spooner to clients Wednesday.
HSBC said Tuesday’s drop in gold prices came as the Reserve Bank of India raised the import duty on gold for the third time this year in an effort to help narrow the country’s current-account deficit. The duty was increased to 10% from 8%.
“Despite the expectations that gold imports may fall, India’s appetite for bullion is anticipated to pick up later in the year due to seasonal demand, with the festive gold-buying holiday Diwali” in early November, wrote HSBC analyst James Steel in a report.
There has also been “good physical buying” of gold in China, with Steel noting an indicator of demand is gold’s premium on the Shanghai Gold Exchange.
Gold’s four-session win streak was fueled by weakness in the U.S. dollar and by better-than-expected Chinese economic data. China is expected this year to overtake India as the world’s largest gold consumer, according to the World Gold Council.
In trading Wednesday, silver for September delivery SIU3 +0.13% rose 4 cents, or 0.2%, to $21.38 an ounce. October platinum PLV3 -0.56% fell $8.20, or 0.6%, to $1,491.50 an ounce.
The Reserve Bank of India also raised the import duty on platinum to 10% from 8%, and on silver to 10% from 6%.
September palladium PAU3 -0.53% also fell Wednesday, by $3.75, or 0.5%, to $735.15 an ounce.