Gold closed up 1% yesterday, but weakened late in Asian trading as the Chinese government announced a $24 billion railway modernization plan. This is the first step in its “targeted stimulus” plan to invigorate the Chinese economy. The economy may already be shaking out the deadwood in certain production sectors, as the HSBC PMI for China rose to 51.9 from 51 in February.
In Europe, the European Central Bank left benchmark rates at 0.25%, as expected, but the press conference later on by ECB President Mario Draghi revealed that outright large-scale bond purchases (Fed-style QE) is being debated by the bank to combat disinflation.
The dollar reacted sharply to Draghi’s press conference, breaking up and out of its recent tight range. This put pressure on gold, which is denominated in dollars. Gold is trading less than half a percent under yesterday’s close, while silver and platinum echo its movements. A weakness in crude oil has been making news the last couple of days, which is another moderating pressure on gold.
On Wall St., stocks opened flat, spiked for just a second, then dropped back down to near unchanged. First-time jobless claims last week jumped from last week’s six-month low, surprising analysts. The number of newly-fired people last week rose by 16,000 to 326,000. Experts had expected 319,000 new claims. The four-week rolling average was nearly flat, at 319,500 compared to the previous week’s 319,250. Another bit of rain on the parade was news that the U.S. trade deficit unexpectedly jumped by 7.7% to a five-month high, as exports dropped.
A futher-weakening yen helped the Nikkei to another three-week high, while news of the Chinese stimulus helped both Japanese and Hong Kong stocks. Mainland Chinese stocks saw a moderate pullback, as banks gave back some recent gains, and spending by wealthy Party officials and business leaders dropped off in the wake of the government’s “no one too big to prosecute” anti-corruption campaign. (One has to wonder how far corruption goes, if a slowdown in the economy is being blamed on a reduction in purchases by the ultra-rich)
All eyes are going to be on tomorrow’s non-farm payroll reports in the U.S., which, unlike the ADP private sector payrolls report, counts Federal, State and local government jobs. Decreases in the number of government employees as been the cause of lower official numbers compared to the ADP report recently.
On the gold front, Asian physical demand has picked up due to recent price drops, and the Indian government keeps making noises about an easing of its iron-fisted gold import restrictions, but hasn’t actually done anything yet. Expect New Delhi to roll something out soon, as national elections are next month.