Bullions turn extremely pale

Weak Chinese data and lower crude oil price put pressure on prices

Bullion metal prices ended substantially lower on Wednesday, 01 May 2013. Though prices were up from the session low, they traded lower amid a general sell off in the raw commodity sector, led by crude oil. Some more weak economic data coming out of China overnight sparked much of the selling pressure in gold and silver markets on Wednesday.

Gold for June delivery ended lower by $25.9 (1.8%) at $1,446.2 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday.

July silver ended lower by $0.84 cents (3.5%) at $23.34 an ounce on Wednesday.

The Federal Reserve's policy-making committee's conclusion of a two-day meeting ended Wednesday afternoon with the much-anticipated FOMC statement containing no major surprises. As expected, the FOMC maintained its purchasing program at $85 billion per month, and kept its target Federal Funds Rate steady at 0-0.25%. The central bank also reiterated its goal of staying true to the current policy course until the unemployment rate declines to 6.5%. Today's statement did contain an explicit mention of a possible increase or decrease to the purchase program. However, this wasn't "new" as prior statements from the Fed have already allowed for the possibility of modifications to the program.

What is being read as slightly bullish for the precious metals and for the raw commodity sector is that the Fed made no mention of a timeframe for winding down its quantitative easing program. However, bearish for the metals and other commodities was the Fed's notion that inflation remains will under wraps.

Many expect the European Central Bank to cut interest rates when it holds its monthly meeting on Thursday. Recent weak EU economic data makes the case for such action by the ECB. An ECB rate cut would be viewed as friendly for the metals markets.

Much of Asia and Europe celebrated public holidays Wednesday, which made for quieter dealings. China did report its official manufacturing PMI came in lower than expected, at 50.6 in April versus the March reading of 50.9. The weaker-than-forecast China PMI helped to put downside price pressure on the raw commodity markets Wednesday.

In the currency market, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.23% on Wednesday.

In today's economic data, total construction spending fell 1.7% in March after increasing an upwardly revised 1.5% (from 1.2%) in February. The consensus expected construction spending to increase 0.5%. Most of the decline was the result of weaker public construction spending. That sector declined 4.1% in March after increase.

Powered by Capital Market - Live News