Fed Tapering, Chinese Data & Emerging Nation Crisis Move Metals Markets

Fed Tapering, Chinese Data & Emerging Nation Crisis Move Metals Markets
Fed Tapering, Chinese Data & Emerging Nation Crisis Move Metals Markets

Precious metals continue to gain, paying very little attention to the Federal Reserve tapering and economic assessment. Yesterday the FOMC reduced its asset purchases by another $10 billion beginning February 1st as Mr. Bernanke leaves the Federal Reserve turning the reins over to Janet Yellen at the end of the week. Gold is trading at 1262.90 as traders worry over the crisis brewing in the emerging nations. Gold traders reacted for just minutes after the Federal Reserve announcement pushing gold below the 1250 price level but recovering within minutes. Recent economic data suggest an uneven US housing and labour-market recovery while political and economic turmoil has gripped developing economies from Turkey to India.

Worries about the health of emerging markets intensified on Wednesday after interest rate increases by central banks in Turkey and South Africa weren’t enough to calm worries about the stability of emerging markets. Global stock markets fell as investors moved to the Japanese yen, US government debt, and gold. SPDR gold holdings rose 2.10 tons to move up to 792.56 tonnes. Stock and foreign exchange markets from Istanbul to Sao Paulo remained under stress, with the Turkish lira staging a short-lived rally after a big hike in interest rates

“If you believe that where there’s smoke there’s fire, these emerging markets issues could have far reaching implications” for gold, said Roy Friedman, an executive vice president with Dillon Gage Metals, a precious metals dealer. If emerging markets woes linger, “we could see a continuation of money rotating out of equities and finding a home in precious metals”.

Silver diverged from gold this morning to give up 4 points to trade at 19.548 weighed down by worries over industrial and base metal demands. Platinum gave up $8.35 to trade at 1405.25 while palladium declined 70 cents to trade at 713.70.

Soft data from China this morning continues to weigh on the markets combined with worries over the emerging nation crisis sent industrial metals downwards. Copper gave up 12 points to trade at 3.232, capping the longest slump in 15 months, on speculation that rising borrowing costs in emerging markets will damp economic growth, eroding demand for industrial metals. China‚Äôs HSBC Final Manufacturing Purchasing Managers’ Index (PMI) fell marginally by 0.1 points to 49.5-mark in January as against a rise of 49.6-level in December.

The South Africa Reserve Bank unexpectedly increased its benchmark interest rate, following central banks from Turkey to Brazil. Countries tightened monetary policy to bolster their currencies. A gauge of global equities approached the lowest in six weeks, while aluminum, nickel, zinc and lead dropped.

 

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