Gold and silver are both showing positive gains on Thursday thanks to a lower USD index. Despite the marketplace more readily fixating itself on next week’s FOMC meeting and supposed reduction to QE, gold and silver are holding strong, at least for now. Some disappointing economic data out of China is likely putting a damper on precious metals’ rally, but it is still early which means there is plenty of time for metals to eek out more gains.
Downbeat Chinese Data
China. and most of Asia, have been somewhat struggling economically over the past few weeks and months. Rising short-term interest rates in China and inconsistent equity performance in Japan are just two of the main issues holding the Asian region back. In the overnight hours of Thursday yet another blow was delivered to the current strength of the Chinese economy.
China’s flash PMI, which was recorded as being 50.5 in December, was reported as falling below 50 to 49.6 in January. This is the lowest PMI reading for China in a half year and is unnerving to investors in the region. This kind of PMI suggests that manufacturing industries in China may be contracting or at least on the verge of doing so. This news translated into weaker Chinese commodities and also had a downward affect on European stocks as well.
Contrary to what is the case whenever PMI readings for the US or Europe are disappointing, a weaker PMI reading in China means for more downward pressure being levied against precious metals. Because China is the world’s largest consumer of gold and silver any poor economic performance will translate directly into a lower spot value reading, luckily the US Dollar is keeping gold and silver afloat today.
Europe Piling ON the Upbeat Data
Not every region of the world received a lower PMI reading as Europe’s increased from 52.1 in December to 53.2 in January. This is the best preliminary PMI reading that Europe has seen in nearly 3 years and adds to a long line of recently strong bits of economic data from Europe. Yesterday it was reported that demand for government bonds in Ireland, Spain, and Portugal is on the rise, something we have not seen since before the recession of 2008.
Currently, both the US and European economies are performing at a level we have not seen in some time. The hope is that 2014 will go as planned and be a year of overall growth the likes of which have not been experienced yet this decade.