Positive indicators that the US economy is recovering and bets that the US Federal Reserve could begin cutting its stimulus programme could keep gold prices flat today. Data from the US showed that jobless claims dropped last week, while its factory output showed a growth that was the best in eight months. This has added fuel to the fire ignited by the release of October 29-30 US Federal Reserve’s meet minutes, putting further pressure on gold.
Speculations are that the US Fed could decide tapering its $85-billion-a-month stimulus programme from as early as December. German GDP data due later in the day should give further indications of the direction the economy is headed. There was further bearish news for the yellow metal as gold holdings in exchange-traded funds dropped further. SPDR Trust, the world’s biggest gold exchange-traded fund, said that gold holdings slipped to 856.71 tons. Holdings fell 3.6 tonnes on Thursday — their lowest since early 2009. Outflows have totaled 450 tonnes this year. Physical demand picked up slightly due to the price drop but many buyers were still on the sidelines hoping for further declines, dealers said.
Gold is heading for its sharpest weekly drop in more than two months as strong US economic data and uncertainty over the timing of the rollback of the Federal Reserve’s stimulus measures sent the metal to its lowest since early July. Gold and silver were both on track for a near 4% weekly drop.
Selling-pressure on the metal was not as strong as in the first half of the year due to assurances from some top Fed officials that stimulus would continue for longer. But positive US data was hurting prices as it could bolster the case for curbing stimulus soon. The Fed’s massive bond-buying programme has burnished gold’s appeal as a hedge against inflation. The number of Americans filing new claims for jobless benefits fell sharply last week and a gauge of factory activity hit an eight-month high in early November, hinting at some strength in the economy. Uncertainty over the timing of the tapering has pushed investors to take money out of gold, causing the metal to drop 25% this year.
Industrial and base metals eased a bit this morning reflecting a drop in eurozone manufacturing. Copper climbed yesterday to trade at 3.19 and is easing this morning. Copper prices were set to close higher for the first week in three on Friday, buoyed by an improving outlook for demand and a temporary shortfall in supply after the shutdown of a Philippine smelter. Poor Chinese and US Manufacturing Index kept the prices in check. However, manufacturing PMI from Eurozone and Germany helped retaining some strength in base metals. Base metals are expected to move higher for the day today as supply shortage for time being over the absence of Philippine smelters can push the prices higher.