Wall Street Takes A Dive Pulling Down Gold

Gold recovered a bit this morning, adding $1.70 in the Asian session as traders bought up the cheap commodity. Gold is trading at 1284.50. Silver is once again taking its clues from gold to trade at 20.423 and platinum is leading the charge adding $3.45 to trade at 1467.50. Earlier this year Investment brokers Goldman Sachs made a surprising call, forecast gold to trade below the 1280 price and to eventually fall to the $1050 range. Many traders laughed this off and markets had little reaction. Goldman Sachs Group Inc.’s Jeffrey Currie isn’t backing down from his bearish call on gold. As bullion’s 8.7 percent rally this year beats gains for equities, commodities and Treasuries, he’s sticking with the view that the metal will be lower by the end of December as the economy improves. Currie, who last year got ahead of the biggest gold collapse since 1980, is an undeterred bear even as hedge funds add to their bullish holdings for a fifth straight week and assets in exchange-traded products advance.

The Dow Jones fell 317.06 points, or 1.9 percent, to 16,563.30 for the largest one-day retreat since Feb. 3. The S&P 500 slid 2 percent, the most since April 10, to 1,930.67. The gauge dropped 1.5 percent in July, its first monthly decline since January. The Nasdaq 100 lost 2.1 percent. 

Concern grew that the improving economy may force the Federal Reserve to raise interest rates sooner than expected. U.S. gross domestic product

expanded at a 4 percent annual pace in the second quarter, confirming the central bank’s view that a first-quarter contraction was transitory. Data today showed fewer Americans filed applications for unemployment insurance benefits over the past month than at any time in more than eight years, signaling employers are hanging on to workers as demand improves. The Fed on Wednesday cut its monthly bond buying to $25 billion in its sixth consecutive $10 billion reduction. The Fed’s Open Market Committee reiterated that it’s likely to reduce bond buying in “further measured steps” and to keep interest rates low for a “considerable time” after ending purchases.

Gold was stuck near a six-week low on Friday and headed for a third straight weekly loss, as U.S. economic optimism offset any safe-haven demand from geopolitical tensions and lower equities. The metal was hurt by data on Thursday that showed that U.S. labour costs recorded their biggest gain in more than 5-1/2 years in the second quarter, bolstering the economy’s outlook. Support for gold from the physical markets was also weak. U.S. gold coin sales fell about 40 percent in July from a month ago, as solid performance in the world’s biggest economy more than curbed bullion.

Industrial metals were trading on a negative bias until the release of Chinese manufacturing PMI which showed a better than expected jump in manufacturing giving metals a bump. Copper is trading at 3.232 adding 2 points. London copper eased in early trading this morning after the rout on Wall Street over Argentinian default soured risk appetite and ahead of a deluge of economic indicators out later in the session, including an assessment of activity in China’s vast manufacturing sector. China will work harder on reforming its economy in the northeastern region, where growth has lagged, Premier Li Keqiang said on Thursday as he promised to enforce targeted policy loosening in the area.