Steep decline in the US dollar and weakness in the global equities take prices higher
Bullion metal prices ended higher on Thursday, 23 May 2013. A steep decline in the US dollar and overall weakness in the global equities took prices of precious metals higher.
Gold for June delivery ended higher by $24.4 (1.8%) at $1,391.8 an ounce on the Comex division of the New York Mercantile Exchange on Thursday. August gold which is now the most-active contract, also tacked on $24.40, or 1.8%, to end at $1,392.80 an ounce.
July silver ended higher by $0.04 cents (0.2%) at $22.51 an ounce on Thursday.
The gold market weakened a bit in the immediate aftermath but then shrugged off some better-than-expected U.S. economic data released Thursday morning. The Japanese stock market tumbled overnight and the Japanese yen rallied in the wake of the U.S. stock market losses on Wednesday, and on some fresh, weak economic data coming out of China. Japan's Nikkei stock index fell by 7% on Thursday. European stock markets were also sharply lower, which in turn led to follow-through selling in the U.S. stock market on Thursday.
China manufacturing data issued Thursday came in weaker than expected. The preliminary China HSBC manufacturing PMI dropped to a seven-month low of 49.6 in May. A number below 50.0 indicates contraction. The fact that gold rallied in the face of this commodity-market-bearish China news also suggests there was solid safe-haven demand for gold on Thursday.
In the European Union, there was more weak economic data released on Thursday. The Markit purchasing managers' survey for the Euro zone came in at 47.7 in May from 46.9 in April, below the 50.0 threshold, which suggests contraction. There was another dour assessment of the European Union economy from an EU official on Thursday. Ewald Nowatny, a member of the European Central Bank's governing council, said there is no improvement in sight for the EU economy. The EU economy has been in contraction for the past year and a half.
In the currency market, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.5%.
Regarding economic data expected at Wall Street on Thursday, the initial claims level dropped back below 350,000. The initial claims level fell to 340,000 for the week ending May 18 from an upwardly revised 363,000 (from 360,000) for the week ending May 11. The consensus expected the initial claims level to fall to 348,000.
Separately, new home sales increased 2.3% to 454,000 in April after a sizable upward revision for March to 444,000 (from 417,000). The consensus pegged new home sales at 425,000. Inventory levels remain depressed. There is only a 4.1-month supply at current sales rates. During a normal environment, homebuilders try to maintain a 6-month supply. That means construction growth should accelerate from current levels.
At the MCX, gold prices for June delivery closed higher by Rs 477 (1.8%) at Rs 26,440 per ten grams. Prices rose to a high of Rs 26,480 per 10 grams and fell to a low of Rs 26,020 per 10 grams during the day's trading.
At the MCX, silver prices for July delivery closed higher by Rs 345 (0.8%) at Rs 43,571/Kg. Prices opened at Rs 43,002/kg and rose to a high of Rs 43,680/Kg during the day's trading.
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