On Monday gold traded steadily during early trading shrugging off aggressive easing measures out of China over the weekend. The move signals China's authorities are getting more and more concerned about the country's economy.
The spot gold price was last at $1,204.50/1,205.30 per ounce, up $1.20 on the pre-weekend close and having traded in a tight $4 intraday range so far.
Over the weekend, the People’s Bank of China’s trimmed its reserve requirement ratio (RRR) by 19.5 percent to 18.5 percent for the country’s largest banks – the second move this year and further evidence of the leadership’s concerns over the slowing economy.
The cut is expected to open up 1.2 trillion-1.4 trillion yuan of funds for lending for the larger institutions though the PBoC also lowered the ratio by another 50 basis points for the small and medium-sized banks that lend to agricultural borrowers and micro businesses, which should release an additional 300 billion yuan in funds, analysts suggested.
“The weaker dollar has provided some lift but, as in the base metals, the higher prices seem to be attracting some selling; weaker equity markets on Friday also led to some risk reduction too,” FastMarkets analyst William Adams said.
“Broad-based risk reduction could initially weigh on precious metals but a secondary reaction could be bullish for the gold price if safe-haven buying picks-up,” he added.
