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A disappointing U.S. housing starts report also helped buoy gold, but gains were tempered amid concerns over weakening demand from top buyer China, following the release of data showing China’s economy grew at the slowest rate in eighteen months.
Chinese government data Wednesday showed gross domestic product expanded 7.4% in the first quarter compared with the same period a year earlier. That’s down from a growth rate of 7.7% in the previous quarter and below the Chinese leadership’s target of “about 7.5%,” though slightly above economists’ forecasts. On a quarterly basis, growth slowed from 1.7% to 1.4%.
The data came one day after a report released by the World Gold Council said that Chinese gold demand is likely to remain flat this year, as a result of the country's economic slowdown and constrained credit markets.
Meanwhile, demand for the yellow metal continues to be underpinned amid escalating tensions between Russia and Ukraine.
The latest developments have seen gunfire in eastern Ukraine cities and Russian war planes in the region, after Ukrainian troops recaptured state buildings from armed pro-Russia separatists in the east of the country.
Russia's President Vladimir Putin has warned that Ukraine is on the verge of civil war, and there is growing uncertainty regarding whether the U.S. will soon be forced to respond to the latest developments in Ukraine with military action.
Gold posted heavy losses on Tuesday after data showed U.S. inflation accelerated in March, prompting investors to reevaluate expectations for a rate hike by the Federal Reserve.
Analysts noted that as the upcoming three-day Easter holiday weekend approaches, it will not be surprising to see the safe-haven assets, including gold, see more demand as markets move into a “risk-off” mode.
“Gold seems to be stuck in a trading range now between around $1,275 and $1,325,” Colin Cieszynski, senior market analyst at CMC Markets told Marketwatch.
“It seems like it has priced in the current level of Ukraine tensions,” so unless something major happens there or the Federal Reserve changes its outlook on tapering its quantitative-easing measures and interest rates enough to move the U.S. dollar, this range may prevail for a while, he said.
“U.S. indices also remain stuck bouncing around in trading channels at the moment. So this is more of a traders market at the moment,” said Cieszynski.
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