Thursday, January 23, 2014

Stocks Swoon, Gold Soars

Futures in multiple markets held hands and jumped off a ledge this morning, after China and US PMI both missed.

Flash U.S. PMI for January missed expectations, coming in at 53.7. Expectations were for a reading of 55 versus 54.4 prior. Anything over 50 shows growth. China was much worse –  the flash Markit/HSBC Purchasing Managers' Index fell to 49.6 in January from December's final
reading of 50.5. Again, that drop below the 50 line separates expansion of activity from contraction.

Two markets did well on this news.

One is the euro.  Interestingly enough, economic activity in the Eurozone reached its highest level since June 2011, coming in at 53.2. 

In fact, if you're looking for a beaten down market that seems to be makinga turn, Europe is worth a look.

The other market doing well is the gold market, though it may also be getting a boost on news that Sonia Gandhi, president of India's National Congress Party (and the Italian born widow of Rajiv Gandhi) is calling for India to ease its restrictions on gold imports.

As you probably know, India’s draconian restrictions slapped 10% import duty on gold and also dictate that 20% of all imports must leave the country as exports. The laws have actually hurt gold exports, and boosted gold smuggling. 

Other Gold News

You can download the latest Thomson/Reuters GFMS Gold Survey 2013 Update right here.  Free registration required.  Some of the highlights

  • China became the world’s top gold consumer in 2013.
  • World investment, which accounted for 28% of overall demand, fell 11% to 1,342 metric tonnes in 2013, its lowest in five years.
  • Last year's price crash triggered a jump in demand for jewelry, coins and bars, particularly in China. GFMS said Chinese jewelry fabrication surged 31% to 724 tonnes in 2013, its largest year-on-year tonnage gain since 1992. Overall jewelry demand hit a five-year high of 2,198 tonnes in 2013.
  • Central bank demand fell by a third last year to 359 tonnes.
  • GFMS sees $1,200 as a long-term floor for gold. Lower prices will ignite physical buying.
  • GFMS says the professional market seems to be over-obsessed with issues around the Fed’s proposed tapering program but that “private individuals in the traditional gold investing countries had no such qualms and as the price tumbled in the second quarter, hordes of these buyers appeared in the market.”

Overall, I’d call the GFMS report moderately bearish.  I expect them to be surprised. Like Today!

Here is Jesse’s latest take on gold. It’s worth reading. One more gold piece: The best damned article you'll read on gold all day.

Other News

More oil spilled in US rail incidents in 2013 than in the previous 37 years combined.  There’s a company that can fix – if not prevent, at least minimize – a lot of those incidents. It’s a recommended position in Gold & Resource Trader, and it’s doing very well. Hang on to that one.

Yesterday, most of China’s internet traffic diverted to a single mysterious house in Wyoming 

I love maps. Especially strange maps, or maps that make you think. Here’s a map showing the population of other countries jig-sawed into “extraordinarily” populated India.

Have a good day.

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