Gold rises on Chinese expectations

CHICAGO - Gold futures on the COMEX division of the New York Mercantile Exchange rose slightly Thursday, as traders hoped recent reports indicating slowing economic growth in China would encourage looser monetary policy there.

The most active gold contract for December delivery gained 4.2 U.S. dollars, or 0.26 percent, to settle at 1,620.2 dollars per ounce.

Gold extended its winning streak to two days and saw a session low of 1,612 dollars per ounce, well above the crucial 1,600 dollar level seen as key to the precious metal's underlying support.

Gold trading was largely focused on Thursday's report from China's National Bureau of Statistics that showed signs of a slowing Chinese economy. According to the National Bureau of Statistics, China's consumer price index rose 1.8 percent in July, which marked the lowest increase since January 2010. China's monthly producer price index dropped 2.9 percent in July, comparing the 2.1 percent decline posted in June.

The Chinese data boosted trader speculation that China would move to combat the slowing economy through looser monetary policy. Loose monetary policy is a positive for gold, as the precious metal typically gains on fears of inflation.

The easing ideas allowed gold to override the negative outside market force of a higher dollar and gain on the session. A stronger greenback is a negative for commodities, as it makes them more expensive for holders of other currencies.

Silver for September delivery rose 2.2 cents, or 0.08 percent, to close at 28.097 dollars per ounce.