Gold and Silver Drop After FOMC Minutes - Friday Payroll Eyed

Posted On: Tuesday, April 3, 2012

Gold and silver took a sharp drop following the release of last month's FOMC minutes at 2:00pm to end firmly in the red.  The main takeaway from the meeting was a consensus that there would be no further monetary easing unless growth slowed.  While the is hardly a revelation, gold and silver fell to session lows on the news.  Both metals relinquished the gains seen on Monday. 

Despite the noise following the release of the FOMC meeting minutes, this week's focus will be Friday's payroll report.  The current consensus sees a 201k reading following the prior month's 227k.  The unemployment rate is expected to remain unchanged at 8.3%.  Wednesday sees private payroll data from ADP.  The current consensus sees a 208k reading following the prior month's 216k.  U.S. employment data has been on a steady uptrend since August of 2011.

Factory orders for February rose 1.3%, below the consensus of a 1.5% rise, and following January's 1.1% drop.  U.S. economic data has been mixed of late, but stocks have largely ignored this fact to rally to multi-year highs.  Yesterday saw a mixed ISM report, and a significant mix in construction spending.  With China's economic growth clearly slowing, and Europe expected to contract in 2012, it would seem to be just a matter of time before U.S. growth is hit, and expectations of more monetary easing to rise. 

Spot gold prices were down $31.06 at $1,648.70 per troy ounce.  Spot silver prices were down $0.35 at $32.73 per troy ounce.  The gold-silver ratio is at 50.91. 

Commodities outside precious metals were broadly lower.  WTI crude futures was down $1.05 at $104.18 per barrel.  Copper futures were down $0.03 at $3.89 per pound.

Treasuries ended sharply lower as the probability of more monetary policy support is dented following the FOMC minutes.  The yield on the 10-year Treasury rose to 2.25%. 

Other News 

China's central bank Governor said the U.S. Fed "has a responsibility to consider the global effects of its actions."  Full Bloomberg article.  The comments come amid a barrage of criticism from emerging markets who are seeing elevated levels of capital inflows following the Fed's QE programs.

April 13 will see first quarter GDP data for China.  An official is estimating growth of 8.4%, the lowest since the first half of 2009.  The consensus estimate is for growth of 8.3%.

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