Gold and Silver End Near Unchanged, Friday Payrolls Eyed

Posted On: Tuesday, May 1, 2012

Conflicting economic reports were the order of the day. The ISM manufacturing index for April surprised to the upside, rising to 54.8, above the consensus forecast of 53.0, and following the prior month's 53.4. This contrasts sharply with yesterdays Chicago PMI which fell to 56.2, well below the consensus forecast of 60.8. Yesterday's poor Chicago PMI was among the factors weighing on risk assets overnight. Stocks jumped on the ISM data. Gold and silver sputtered, but managed to recover to near unchanged. Focus remains with the upcoming April non-farm payroll report this Friday.

Overseas economic data continue to raise concerns with manufacturing in China and Australian both missing analyst estimates. China's official April PMI rose to 53.3 from 53.1 in the prior month, but below expectations of 53.6. Interestingly, Chinese PMI data and the HSBC Chinese PMI data continue to diverge, raising questions over what exactly is happening with Chinese manufacturing. HSBC's PMI data has showed contraction for the last few months. A sharp drop in Australian manufacturing suggests that the HSBC PMI data is more accurate however. Australia's central bank also lowered interest rates by a greater than expected 50 basis points to 3.75% from 4.25%. 

Spot gold prices were down $2.18 at $1,662.86 per troy ounce. Spot silver prices aedged lower by $0.04 to $31.03 per troy ounce. The gold-silver ratio remains elevated at 53.71.

Commodities outside precious metals were mostly higher. WTI crude futures were up $1.16 at $106.03 per barrel. Copper futures were up $0.0105 at $3.84 per pound.

Treasuries showed modest losses following the better than expected ISM data. The yield on the benchmark 10-year Treasury is at 1.94%. The USD was mixed.

Oher News

Construction spending for March is due out at 10:00 am. The consensus forecast is for a 0.5% rise following the prior month's 1.1% decline.

Bank of America (BAC) is to reduce headcount among its most highly compensated employees according to the WSJ. Full article.

Despite the many calls that European austerity is aggravating the European sovereign debt crisis, Germany continues to hold the austerity line according to the FT.

Shares of Chesapeake Energy are rising on new that CEO Aubrey Mcclendon is giving up his post as Chairman of the Board. Aubrey has been under intense pressure following revelations that he had received hundreds of million in loans from the company. Shares of CHK were up $1.16 at $19.60.

Is the Fed reckless? Paul Krugman believes they are, noting in a Bloomberg interview that the U.S. is in the midst of a lost decade, and that mass unemployment in the U.S. is "reckless." Krugman believes that the Fed should be willing to tolerate inflation of up to 4% to bring down unemployment. Read more and watch a debate between Krugman and Presidentail Candidate Ron Paul.

The U.K. PMI for April fell to 50.5 from the prior month's 51.9, and well below the consensus estimate of 51.4.

News Corps Chairman Rupert Murdoch was demed "not a fit person" to lead a major company according to U.K. lawmakers. Rupert Murdoch's News Corp has been embroiled in a wire tapping and phone hacking scandal for the last several years.

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