Precious Metals & Industrial Metals Trading In The Green

Gold is trading in the green this morning holding near a 4 week high at 1336.00 as silver really shines adding 106 points to trade at 22.723 after the release of stronger than expected Chinese manufacturing data. Traders are beginning to pay very close attention to the Federal Reserve with the FOMC meeting next week. Gold has often tracked shifting expectations as to whether the US central bank would start reining in nearly five years of super-easy dollars, a measure which had sparked fears of inflation and encouraged investors to buy the precious metal. Prices sank to a near three-year low around $1,180 in late June on worries over the Fed’s plan to wind down the stimulus. Odds makers have put the possibility of tapering at this meeting close to 0, with poor jobs data and the government shutdown effects remaining unknown. The prospect of the Fed staying the course on its easy-money policies through year’s end sent the Dow Jones to a one-month high, market participants said. The blue-chip index gained 75.46 points, or 0.49%, to 15467.66 and is once again nearing record territory, and the S&P 500 finished at a fresh record close, up 10.01 points, or 0.57%, at 1754.67. Treasury yields sank to a three-month low on the report. The yield on the 10-year Treasury, which moves in the opposite direction of the price, fell to 2.512%.

HSBC’s China manufacturing purchasing managers’ index showed activity in the nation’s manufacturing sector expanded more than expected in October, rising to a seven-month high. The initial October reading for China’s manufacturing activity came out at 50.9, compared with a final reading of 50.2 in September. The score was a seven-month high; above the 50 mark that separates expansion and contraction in factory activity. Copper made an amazing turnaround this morning after the data release adding 12 points to trade at 3.278 after suffering a huge drop on Wednesday. Copper futures sank 2% as concerns about the stability of China’s financial system sparked worries over the country’s future demand for copper. China’s short-term interest rates jumped to levels not seen since July as some companies tapped money markets to fund deadline tax payments and as worries spread about bad debts in the banking system, analysts at Scotiabank said in a note.

Adding to the tension, while China’s central bank refrained from removing liquidity from the domestic money market on Tuesday, authorities also avoided pumping liquidity into the system in recent days. The lack of open market activity is a sign of concern that tighter liquidity will hamper growth in the world’s second-largest economy, analysts said. China is the world’s largest copper consumer, accounting for about 40% of global copper demand, and fears of slower economic growth there contributed to a 16% drop in copper prices during the first half of 2013.

The weaker US dollar is also helping the metals markets to trade on a positive note this morning. Palladium rose by 1.50 to trade at 747.00 while Platinum added 9.30 to reach 1443.60.