Gold Weighs In

By FX Empire Analyst - Barry Norman
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Asian equities plunged from its high since May as Japanese exports shrank for three consecutive months. Chinese manufacturing also contracted for the eleventh month in September. This morning Chinese HSBC PMI data showed an ongoing contraction in manufacturing. Going ahead gold is expected to remain under pressure at least until the European session.

Expect the EUR to extend its loss against the dollar as Spanish bad loans are standing at a record high of 9.9% of their outstanding portfolio, rising from the prior high of 9.4%. Moreover, an accelerated capital flight (326billion Euros) from the four nations of Europe (Portugal, Greece, Italy & Spain) have just coincides with 300billion Euros from the international lenders. Such capital erosion has forced these counties to pay more funding cost to retain them (Greece: 7%, Spain: 6.5%, Italy: 6.2%). Besides, the Euro area manufacturing numbers due later today are also likely to point some minimal improvements which are not enough to pull the economic condition.

From the US today we can expect the Philly Fed region’s manufacturing will in negative territory following the drastic weakness in Empire state. Weekly jobless claims may also increase. All these may indicate a comparative weak dollar during the evening hours. Expect gold to stay weak at least through the European hours after which prices may recoil back.

Gold closed nearly flat and traded near its 6-1/2 month high hit in early trade, supported by monetary stimulus from the world's major central banks despite pressure from heavy selling in crude oil prices.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,305.4 tons, as on Sept 19. Silver holdings of iShares silver trust, the largest ETF backed by the metal, increased to 9,883.4 tons, as on Sept 19.

Facing record gold prices, buyers of the yellow metal in India are swapping old jewelry for new as they prepare for the country's festival season.

Concerned over rising gold imports, the Reserve Bank of India today said it is planning to come out with financial products on the lines of gold ETFs to give options to investors to take advantage of price movement in the precious metal.

Sudan opened its first gold refinery on Wednesday as it seeks to improve the quality of its rising gold exports and offset the economic damage inflicted by the loss of most of its oil revenues.

While writing this report silver prices have retreated a bit at the Globex followed from weakness in Japan exports and Chinese manufacturing, Silver would have been more pressurized from the weak Asian equities which have fallen from their highs since May.

Going ahead expect silver to stay weak as the European nations have seen huge capital flights as mentioned above The Chinese PMI data will weigh heavily on industrial metals, which is already pressurizing silver. Expect to see silver decline today.

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