MW: Gold down for second day after weak China data
Stronger U.S. dollar contributes pressure; silver slips further
By Myra P. Saefong and William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures headed lower for a second session on Thursday, undercut by strength in the U.S. dollar as well as Chinese data showing a slowdown in manufacturing activity.
April gold futures GCJ4 -0.42% fell $6.80, or 0.5%, to $1,313.60 an ounce on the Comex division of the New York Mercantile Exchange.
March silver SIH4 -0.50% was down 17 cents, or 0.8%, to $21.68 an ounce a day after ending an 11-session winning streak.
Metals trimmed losses somewhat after data showed U.S. consumer prices rose 0.1% in January, while first-time claims for unemployment fell by 3,000 to 336,000 in the latest week.
But Thursday’s tone was set after a preliminary reading of Chinese manufacturing activity in February indicated a deepening contraction, as the HSBC/Markit purchasing managers’ index fell to its weakest level in seven months. In addition, business activity in the 18-nation euro zone lost momentum in February, dragged down by weakness in France.
While weak China data contributed to turmoil in emerging markets in January that in turn helped spur haven-related buying of gold, the yellow metal wasn’t getting a lift this time, even as violence escalated in Ukraine. China is among the world’s biggest buyers of gold.
Kathleen Brooks, research director at Forex.com in London, said the China PMI reading may be less likely to spur broader worries over emerging markets since overall Chinese data have been upbeat in recent weeks, while the February PMI data might have been affected by Lunar New Year celebrations.
“The link between [emerging markets] and weak China data seems to be breaking down,” she said. “Instead, developed markets seem more affected by the PMI miss this month.”
On Thursday, the flash Markit manufacturing purchasing managers index showed U.S. manufacturing growth accelerated to the highest level in February since May 2010, but the Philadelphia Fed’s manufacturing index dropped sharply in February.
Gold prices closed lower on Wednesday for the first time in 10 sessions and fell further in electronic trading overnight after minutes from the Federal Reserve’s January meeting showed officials couldn’t agree on the outlook for short-term interest rates, raising questions about the pace of reduced asset purchases.
Still, in regard to the gold market, the minutes “taught us nothing new,” said Adrian Ash, head of research at the BullionVault. “The Fed is dead-set on tapering its [quantitative-easing] money printing still further ... but the Fed is also ready to pause if economic data keep missing forecasts.”
For now, a “relief rally” in the U.S. dollar DXY +0.11% contributed to gold’s decline, said Ross Norman, chief executive officer at Sharps Pixley.
“There remains some skepticism amongst market professionals but we believe that 2013 will have marked the low tide in gold prices, and 2014 bears the hallmark of being quite a positive year,” he told MarketWatch. “As always, markets do not move in straight lines, and the current price weakness is to be expected as people book profits.”
Separately, analysts at UBS raised its forecast for average gold prices this year to $1,300 from $1,200 an ounce, according to BullionVault .
In other metals trading, platinum prices appeared unfazed by news that strikes among miines in South Africa are likely to continue. The country’s biggest platinum union said a strike will continue until companies make a better wage offer.
April platinum PLJ4 -0.70% fell $10.70, or 0.8%, to $1,413.80 an ounce, while March palladium PAH4 +0.21% lost 65 cents, or 0.1%, to $734.75 an ounce.
March high-grade copper futures HGH4 -0.05% fell 1 cent, or 0.3%, to around $3.28 a pound.
