Gold Sinks On China Exports, Dollar Strength
Gold continued its recent bad run on Monday, sinking 0.6% to $1200.0 an ounce, as the pendulum of speculation regarding Fed monetary policy appears to be swinging back toward summer tightening.
By Peter Martin
Monday, April 13, 2015 - 00:00
The move marks the precious metal’s fourth decline in five trading sessions and comes amidst a period of sustained dollar strength.
A woeful employment report at the beginning of the month sparked a brief reversal in the dollar’s gains and a rethink of market expectations for a summer rate hike from the Fed, but last week’s release of the minutes from the most recent FOMC meeting and comments made on Friday by Richmond Fed President Jeffrey Lacker have served to restore some clout to the view that the June meeting could be a candidate for a rise in rates.
Mr Lacker reaffirmed his previously stated view that the case for a rate hike in June ‘will remain’ strong’ unless incoming economic data disappoints substantially and suggested such a move would still offer the flexibility to ease should future data warrant it. ‘I don't see it as problematic to reduce rates having raised them once,’ he said, though acknowledged such an outcome would be unexpected.
The dollar has made broad gains today, the dollar index rising 0.1%, with most of that strength coming against commodity currencies, after a report showed a steep fall in Chinese exports last month. Exports fell 15% in China in March, the worst performance since the days of the financial crisis, and this has added to fears that the commodity-hungry Chinese economy is laboring to maintain its growth rate. AUD/USD fell 1.22% to 0.7588, while USD/CAD rose 0.28% to 1.2595.
The euro fell 0.19% against the dollar, despite more data suggesting substantial improvement in manufacturing in key eurozone economies. Italy’s industrial production grew 0.6% in February, versus a consensus estimate of +0.3%, the best monthly change since early last summer. This follows 0.2% growth indicated last week for the same period in Germany.
The US economic calendar is thin today, with the Treasury Budget (released at 14.00 ET) the main indicator of note, though the rest of the week boasts a busy schedule: March retail sales data on Tuesday and a preliminary look at April’s consumer sentiment index on Friday are among the highlights. Furthermore, the earnings season will shift into high gear on Tuesday with Dow Jones components Intel ($INTC), Johnson & Johnson ($JNJ) and JP Morgan ($JPM) among those reporting to the market.
In keeping with the cautious tone already set by European stock markets on Monday, stocks on Wall Street opened little-changed, though the major benchmarks did advance slightly. The Dow Jones was up 9 points or 0.05% at 18,066 shortly after the opening, while the S&P 500 Index rose 0.09% to 2103.9.
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