Chinese Data Supports Industrial Metals

Gold is trading flat at 1388.00 this morning, moving between small losses and gains as Syria weighs on traders as the US congress returns from its holiday recess and will begin to debate US intervention. With global focus on US lawmakers the Federal Reserve is also back in focus after a lackluster nonfarm payroll release on Friday. U.S. employers hired fewer workers than expected in August and the jobless rate hit a 4-1/2-year low as Americans gave up the search for work, complicating the Fed’s decision on whether to scale back its monetary stimulus this month. Gold has lost 17 percent this year amid expectations the Federal Reserve will curb quantitative easing as early as this month. Fed officials will still reduce the $85 billion monthly bond-buying program by $10 billion at the Sept. 17-18 meeting, according to the median of 34 economists in a Bloomberg survey after the jobs data was released. Employers added 169,000 workers after an increase in July of 104,000 that was smaller than first estimated, government figures showed on Friday. 

Last week gold rallied on fears of intervention in Syria as the US pushed hard to build coalition support. France agreed to assist if military action were taken, while the UK Parliament votes against military action but prices eased at the end of the week to close in the red. Gold slightly fell while silver rallied. The market expectations for the next FOMC’s meeting keep gold and silver from forming a clear trend. Some analysts suspect the Fed will taper QE3 in September from $85 billion to $70 billion. Even in such an event, this decision’s effect might not be significant on gold and silver: QE3 had little positive effect on precious metals during 2013; thus, the negative effect might not be too severe over the coming months. Until then, the progress of U.S economy may keep moving gold and silver prices:  Last week, the non-farm payroll report presented an increase of 169k in jobs – a bit lower than anticipated.

The Bank of Japan, on Thursday held its rates and current stimulus and was followed with similar actions by the Bank of England and the European Central Bank. As traders returned from long summer holidays the markets were more or less quiet and focused on the tensions in the Middle East. Safe haven trading remained the overall controlling factor.

Silver eased 14 cents this morning to trade at 23.75 while copper did the opposite gaining 25 pips to trade at 3.285. Metals are expected to gain after Chinese data this weekend supported a strong recovery in China. The Chinese trade balance surprised investors reporting over expectation while PPI and CPI reported close to expectations this morning. China’s trade surplus rose in August to its highest level this year, while inflation remained under control, government data released on Sunday and Monday showed, in further signs that the Chinese economy and possibly the global economy are faring a little better as the summer ends.

The government reported over the weekend that China’s surplus reached $28.52 billion last month, the highest level since last December, as exports accelerated. Because China is the world’s largest exporter and often the first large country to release trade data each month, its trade figures are a widely watched barometer not only for the health of China’s large export sector but also of the global economy.