Another Tumble in the Price of Gold

May 16, 2013

Commodities continue to lose favor.  Gold dropped 1.7% overnight to $1372.70 per ounce.  Oil fell by 0.9% to $93.43 per barrel.

The commodity-sensitive currencies of Australia and New Zealand lost 0.9% and 1.0% against the U.S. currency overnight, which also advanced by 0.3% against the yen and loonie, 0.2% versus the euro, Swissie and sterling and 0.1% against the yuan.  A Swiss National Bank official said the franc’s cap against the euro will be maintained as long as necessary.  Such was adopted initially in September 2011.

On equity exchanges in the Pacific Rim, stocks gained 1.8% in China, 0.9% in Taiwan and Vietnam, and 0.8% in South Korea but fell 1.1% in the Philippines, 0.5% in Australia, and 0.4% in Japan.  Share prices in Europe are down 0.4% in Paris and Madrid and by 0.2% in Frankfurt, but they’ve risen 0.2% in Milan and 0.1% in London.

Ten-year Japanese JGB, German bund and British gilt yields have respectively dropped by three, two and a single basis point.

Japanese GDP and revised industrial production data showed greater-than-forecast strength.

  • First-quarter real GDP climbed 3.5% at an annualized rate from the final quarter of 2012, led by a 3.7% advance in personal consumption and a 16.1% surge in exports.  Non-residential business investment contracted at a 2.6% annualized pace, but public works went up by 3.4%.  This was the strongest overall growth rate in a year and beat expectations of an annualized 2.7% growth rate.  Relative to the first quarter of 2012, however, GDP edged just 0.2% higher, and nominal GDP between 4Q12 and 1Q13 was just 1.5%.  The GDP price deflator fell by 1.2% between 1Q12 and 1Q13.
  • March industrial production growth was revised to 0.9% from 0.2% reported initially.  The gain in industrial shipments was revised sharply upward as well to 1.2% from 0.3%.  Industrial production in the first quarter was 2.2% greater than in 4Q, reversing the earlier quarter’s drop of 1.9%.

There was some good data from Euroland as well.

  • Record March trade surpluses of EUR 18.7 billion seasonally adjusted and EUR 22.9 billion not adjusted were announced.  Seasonally adjusted exports climbed 2.8% on month, while imports fell by 1.0%.  The unadjusted surplus in the first quarter of EUR 28.1 billion represents a EUR 29.4 billion improvement from a deficit of EUR 1.3 billion in the first quarter of 2012.
  • CPI inflation has dropped significantly below the ECB target, increasing the central bank’s flexibility to counter the recession.  Total consumer prices in April dropped 0.1% on month, including declines of 0.4% in the price of services and 1.0% in energy.  The 12-month increase of the CPI was 1.2% in April, down from 1.7% in March and 2.6% in April 2012.  Core inflation fell by half a percentage point to 1.0% in April from 1.5% in March.  The ECB defines price stability as “below but close to 2.0%.”  1.2% is close to 1.0%, not 2.0%.

Japanese stock and bond transactions generated a JPY 260 billion inflow last week versus a JPY 88 billion outflow in the previous week.  Foreigners bought JPY 879 billion of Japanese equities but sold JPY 413 billion of Japanese bonds.

New Zealand finance ministry officials said the budget is on track to return to a slight surplus by fiscal 2014/15.  The New Zealand business purchasing managers index improved 1.1 points to 54.5 in April.  Strengthening activity is helping public finances.

Foreign direct investment into China posted on-year growth of 0.4% in April, which was much less than anticipated.

South Korean producer prices dropped 0.3% on month in April and by a greater 2.8% from a year earlier.

South African wholesale turnover plunged 5.8% on month in March, swinging the 12-month change to a drop of 0.7% from a rise of 2.2% in February.

Israeli GDP rose 2.8% last quarter, which was marginally faster than the 4Q12 pace.

Norwegian mainland GDP expanded 0.7% in 1Q after rising 0.2% in 4Q12.  Total GDP dipped 0.2% on weak trade flows.

Italy posted a EUR 3.237 billion trade surplus in March after a EUR 1.1 billion surplus in February.  The Irish trade surplus widened 11.5% to EUR 3.5 billion in March.

Producer prices in the Czech Republic dropped 0.5% on month in April, halving the on-year PPI inflation rate to 0.5%.  Austrian CPI inflation slowed to 1.9% in April from 2.3% in March. 

Bank Rossii yesterday left Russia’s refinancing rate unchanged as expected at 8.25%.  Central bank decisions today are awaited in Turkey and Chile.  Plosser and Lacker, Fed district presidents, made predictably hawkish remarks overnight.

Scheduled U.S. data releases today include consumer prices, housing starts, building permits, the Philly Fed manufacturing index, and weekly jobless insurance claims.  Canada reports securities transactions.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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