Gold prices down in China after official PMI, Caixin survey ahead

November 1, 2015

Singapore (Nov 2)  Gold prices dropped slightly in early Asia on Monday as investors digested the latest manufacturing data from China

Gold for December delivery on the Comex division of the New York Mercantile Exchange fell 0.06% to $1,141.10 a troy ounce.

Also on the Comex, silver futures for December delivery eased 0.06% to $15.525 a troy ounce.

Elsewhere in metals trading, copper for December delivery fell 0.52% to $2.304 a pound.

Data released Sunday showed that the official China's manufacturing purchasing managers' index held steady at 49.8 in October, the weakest level since August 2012. Analysts had expected the index to inch up to 50.0 last month.

A reading below 50.0 indicates industry contraction. Copper traders view Chinese factory activity as an indicator of the nation's copper demand, as the red metal is widely used by the sector.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

China's weak start to the fourth quarter offers the latest evidence that the economy is under increasing stress. China's biggest industrial companies are coming out with lousy nine-month results.

Premier Li Keqiang gave words of reassurance over the weekend that the economy can maintain "medium to high-level growth" for some time, and that China's consumption has "a lot of room to grow."

But even after the PBOC's interest-rate cut last month, the sixth in under a year, real interest rates for borrowers are still high.

Last week, gold futures slumped to a three-week low on Friday, amid speculation the Federal Reserve may still raise interest rates this year.

The U.S. central bank left interest rates unchanged following a two-day policy meeting on Wednesday, as widely expected, but surprised the market with a hawkish statement, which included a direct reference to its next policy meeting.

The Fed's statement did not repeat that global risks would have a likely impact on the U.S. economy, as it warned at its last meeting in September. Investors interpreted that omission as a hawkish signal in deciding when to raise rates.

In recent weeks, investors had pushed back expectations for a rate increase to March 2016 due to weakness in the global economy and its impact on U.S. growth prospects.

Market players have been trying to gauge when the Federal Reserve will raise interest rates for the first time in nearly a decade after recent economic reports offered a mixed picture of the U.S. economy.

The Commerce Department reported on Thursday that the U.S. economy grew at an annual rate of 1.5% in the three months to September, missing expectations for growth of 1.6%.

The timing of a Fed rate hike has been a constant source of debate in the markets in recent months. The U.S. central bank has one more scheduled policy meeting before the end of the year in mid-December.

In the week ahead, investors will be focusing on Friday’s U.S. jobs report for October, which could help to provide clarity on the likelihood of a near-term interest rate hike.


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