Gold and silver dipped near the end of Asian trading overnight, but regained their previous levels in Europe. The PGMs took a hit right before the New York open, after being moderately lower throughout European trading. The dollar is moderately lower on profit taking, after big gains Thursday and Friday.
Enthusiasm overseas for an American economy that seems to suddenly be revving up is fighting over worries about the reduction in U.S. quantitative easing measures. Stock markets took the positive news to heart, with the Nikkei up 1.3%, the Hang Seng up 1.43% and even Euro markets up slightly. The bond market concentrated on taper fears, with the yield on 10-year Treasuries leaping from 2.60% to 2.75% Friday.
The bond market and government offices are closed today for the Veterans Day holiday, and similarly in Europe for Armistice Day.
Emerging markets are fearful of the Fed tapering its bond and mortgage-backed securities purchases, because it will cause U.S. bond yields to increase. Then, money that had entered the emerging market economies looking for yield will move back to the U.S., sparking a rise in rates for those nations. With many emerging markets already struggling with high inflation, we will probably see more demand for physical precious metals as the citizens of those nations move to preserve their purchasing power.
While this used to be a good sign mostly for gold, silver is also getting a boost since the Indian government put so many restrictions in place on importing gold. Silver imports in Indian have surged to record levels, and jewelers are now pushing platinum and diamonds as an option to gold.
The Chinese Communist Party is in the middle of its policy meetings, which will run until Tuesday. Chinese inflation for October was reported today to be 3.2% year over year, and the People’s Bank of China is auctioning off 2-year bonds in an attempt to drain liquidity from the market. Balancing inflation with a conversion of the economy away from a purely export-driven model is the top concern for the government in Beijing.
Even the mainstream media is taking notice of all the massive gold vaults being built in China and Southeast Asia, as a huge 2000 tonne gold vault was recently opened in Shanghai by Malca-Amit. Gold consumption in China is projected to increase by 29% this year, making China the #1 importer of gold while it is also the #1 producer of gold. Bloomberg reports that gold demand in China, India, Indonesia, and Vietnam now accounts for 60% of global demand.