A liquidity crunch in China and a plummeting rupee in India saw support evaporate for precious metals and raw commodities overnight, as sell stops were hit and the precious metals hit 34-month lows. Prices recovered slightly leading up to the New York open, but dipped as news that first quarter GDP growth in the U.S. was revised down from 2.4% to 1.8%. This news was seen through the “bad news is good news” lens by the stock market, as it meant the dreaded tapering of bond purchases by the Fed was less likely. Stocks opened higher as precious metals felt the pressure of the flow of money back into equities.
In Asia, the Nikkei finished down 1% after being up as much as 1.7%, on worries over market liquidity in China, and a dump of small cap stocks. Chinese stocks recovered from their losses to end flat, as the Peoples Bank of China reiterated that it was assisting well-behaved banks with their liquidity problems on an individual basis. Hong Kong stocks were up 2.4% on the best performance in months, as Chinese bank shares recovered.
In Europe, stocks were up over 2% on ECB president Mario Draghi’s assurances that there was no end in sight for the central bank’s easy money policies.
The dollar index is making a run past 83, as the euro weakens for the 6th day in a row. The Indian rupee notched yet another all-time low against most major currencies, making gold even more expensive. In other news from India, the government and forbidden rural banks from accepting gold jewelry or coins as loan collateral. While this may ease gold imports, most rural Indians keep all their savings in gold, and will have to sell it into the market for needed cash now.