Morning Market Update: April 16

April 16th, 2013 by

Precious metals are continuing a steady recovery in New York, after bargain hunters and very heavy physical buying in Asia pulled gold and silver off 2.5-year lows. Some gold retail stores in Asia are reporting as selling completely out of all gold products.

Gold’s low of $1321.50 yesterday was below operating margins for some miners, which would have resulted in lower supply if prices had remained that low. CME Group has announced higher margins on gold contracts, which should prevent weaker speculators from reestablishing a position.

The dollar is lower today, and oil is steady after pulling off a 9.5-month low overnight.

In the U.S., housing starts were up 7% in March from February numbers, to a level not seen in nearly five years. Builders are rushing to supply demand that recent restricted housing inventory has built up. The Consumer Price Index dropped 0.2%, mostly on lower fuel prices. However, industrial output posted a small, but unexpected drop for March of 0.1% after a healthy February number that was revised upward to 0.9%. Stocks opened higher as Goldman Sachs and Coca-Cola both beat earnings estimates.

In Europe, German economic sentiment took a much larger than expected drop in April as the ZEW Index hit 36.3 against an expected 43.0. March’s number was 48.5, so this was a nearly 12 point drop. European stocks are lower, as the euro tops 1.31.

In Asia, the Nikkei is down for a third day, but the falling yen helped limit the damage. Chinese stocks are up for the first time in three days, on the red-hot real estate market, even though economic growth was reported slightly slower than expected.

All eyes will be watching to see if the bounce in precious metals can manage a close near the upper level of trading today, but it usually takes at least 4 days for the market to decide which direction to head after a large correction as we have had the last two days.

by David Peterson