FXEmpire US Politics & Chinese Data Shake Up Metals

Gold gained in the Asian session by under $2.00 but remains directionless at 1270.10. Traders are taking advantage of the weak US dollar to buy up the cheap commodity, while others are selling as gold continues to plummet and there is no support as funds continue to dump the asset. On the other hand, copper and silver are trading in the red, with silver down 124 points at 21.135 and is expected to break below the 21 support level as both precious metal and industrial metals are trading in the negative. Copper is down 6 points at 3.265 after Chinese trade balance numbers released over the weekend indicated a drop in demand for metals and ore.
The prices of gold and silver resume their downward trend as both precious metals’ prices tumbled down last week. The political developments in the U.S that resulted in the government shutdown and possibility of a default are likely to be the main news items that will unfold during the upcoming week. On Thursday and Friday, some analysts speculated some progress in the negotiations between the GOP and President Obama, which has led to a rally of the U.S stocks and tumble of precious metals.

The price of gold tumbled down by 3.18% last week; further, the average price reached $1,304.2 which was 0.60% below last week’s average. Gold ended the week at $1,268.06. The price of silver also declined by 2.28%; on the other hand, the average weekly rate was $21.95, which was 1.45% above last week’s. Gold prices fell on Friday ending the week 3.4% down as sell off by hedge funds and institutional investors weighed on prices which halted trading at Comex under the stop logic mechanism. Optimism that the Congress would reach a deal to avert US debt default hurt gold’s safe haven appeal. Though negotiations have progressed over the weekend, no deal has been finalized yet. IMF Christine Lagarde warned of massive disruption to global economy if US fails to lift the debt ceiling. The biggest bullion-importing bank in India, Nova Scotia plans to team up with jewelers to offer gold deposit schemes to ease tight supplies.

This weekend was also the G20 meeting where world finance leaders decided to issue a communique in regards to the US situation. Numerous countries at the annual meeting of the International Monetary Fund and the World Bank said over the weekend the US central bank’s expected tightening had already added challenges to their struggling economies, stirring capital outflows and pressing their currencies lower. The IMF’s steering committee, the International Monetary and Financial Committee, itself cautioned the Fed and other central banks in advanced economies when they begin “normalizing” their ultra-low interest rates and easy-money policies.

Industrial metals are responding to a weak trade balance report from China over the weekend. Copper prices gained on Friday on hopes a deal would be reached in US, which supported riskier assets. Chinese copper imports rose 18.1 percent to 457,847 tons in September from 387,564 tons in the previous month. However, imports fell 10% to 3.26 million tons in the first nine months of 2013 from 2012. China’s trade balance fell to 15.2B in September from 28.5B in August. Exports fell 0.3% YoY while imports rose 7.4%. Data released this morning showed that Chinese CPI rose to 3.1% from 2.6 % while PPI came at -1.3%

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