Metals In The Morning – Chinese Data & Fed Speakers In View

           Precious metals spent last week on a roller coaster ride all on hopes and dreams of Fed tapering. Those dreams were dashed on Wednesday after Mr. Bernanke and team, held rates and policy in place for the time being. Gold is down at 1320.80 falling close to $12 in the Asian session to start the week. Silver fell harder to trade at 21.473 giving up 2% this morning. Platinum and palladium diverged with platinum trading at 1429.60 slightly in the red and palladium gaining 30 cents to trade at 717.10. Copper is the surprise this morning as industrial metals do not seem to be responding to positive data from China. Copper is down 33 points after the data release to trade at 3.272.

Precious metals slumped as comments from a slate of Federal Reserve officials cause traders to reassess their expectations for the duration of the central bank’s bond-buying program. Gold had surged by nearly five per cent during the previous session, the largest rally in percentage terms since March 2009.

Bearish gold traders scrambled to close out their bets on lower prices following the Fed’s decision late Wednesday to leave its $US85 billion-a-month bond-buying program unchanged.

James Bullard, president of the Federal Reserve Bank of St Louis, said on Bloomberg TV on Friday that “a small taper is possible in October”. Bullard also said the Fed’s move this week to hold to the pace of bond purchases was a “close decision”.  Also on Friday, Kansas City Fed President Esther George said she was worried that the Fed’s ongoing efforts to stimulate the economy fail to account for economic progress already made. George was the lone dissenting vote at the Fed’s policy meeting on Wednesday.

Indian gold imports could fall during this year, which may also curb down the rally of gold prices. According to one report, India’s gold imports may fall by 11% (y-o-y). Conversely, the Rupee gained more than 8.9% of its value in the recent month. If the Rupee continues its upward trend, this could pull up gold and silver prices. In China, the ongoing recovery of the economy along with the strong demand for gold and silver are likely to keep the prices of gold and silver from further falling.  China’s economy showed new signs of strength in September as an initial gauge of manufacturing activity rose to a-six month high The preliminary HSBC China Manufacturing Purchasing Managers Index rose to 51.2 in September compared with a final reading of 50.1 in August, HSBC Holdings PLC said on Monday.

Lastly gold holdings of SPDR gold trust ETF slipped again for the third consecutive week.  During the month, the ETF’s gold holdings fell by 1.18%. The ETF was also down by 32.62% since the beginning of 2013 (up-to-date). Current gold holdings are at 910.19 tons. If the ETF’s gold holdings keep falling, this will signal that the demand for gold as an investment is weakening.

Industrial metals prices edged lower after hitting their highest in almost a month as investors, following the U.S. Federal Reserve’s decision to stick to its stimulus program, shifted focus back to fragile fundamentals but declines were limited by Chinese data this showing that manufacturing rose to a six-month high in Sep, signaling that a rebound in the Chine’s economy is gaining steam. The preliminary reading of 51.2 for PMI by HSBC Holdings Plc and Markit Economics compared with a 50.9 by Bloomberg. The gauge was at 50.1 in Aug. - fxempire.com