July 24, 2013
Factory activity rebounds in July.
Conditions in the manufacturing sector improved in July as firms enjoyed a rebound in new orders, took on new workers and increased output at the fastest clip in four months, an industry report showed today. Financial data firm Markit said its “flash,” or preliminary, Manufacturing Purchasing Managers Index rose to 53.2, a four-month high, from 51.9 in June. A reading above 50 indicates expansion. Output rose to 54.0, also the highest since March, from 53.5 in June. Domestic demand rose and new export orders rebounded after contracting in June. As workloads increased, firms took on more workers, with the employment sub-index rising to 52.6 this month from 49.9 in June. But the rate of job creation remained “disappointingly weak” and well behind the pace seen at the start of the year, said Markit chief economist Chris Williamson, who added that firms are still focusing on cost-cutting to boost combativeness. The “flash” reading is based on replies from about 85 percent of the U.S. manufacturers surveyed. Markit’s final reading will be released on the first business day of the following month. While the manufacturing rebound bodes well for U.S. growth in the third quarter, it is unlikely to persuade the Federal Reserve to hasten the end of its massive stimulus program. “It is likely that policymakers will generally need to see growth strengthen further before sounding more confident about the ability of the economy to withstand any tapering of stimulus,” Williamson said. In a July 5 Reuters poll, the majority of economists at large Wall Street firms said they expected the Fed to start shrinking the size of its debt purchase program by September. The poll was conducted after government data showed the economy had added more jobs than expected in June. Fed Chairman Ben Bernanke has signaled plans to slow down the stimulus program as long as the economy continues to recover as expected. But he also told Congress last week that the central bank’s $85 billion in monthly bond purchases “could be maintained for longer” if the labor market outlook were to darken.
Gold Futures Climb Near 1-Month High on Dollar, Stimulus Outlook.
Gold climbed toward a one-month high in New York as the dollar’s slump and speculation the Federal Reserve will maintain stimulus spurred demand for the metal. The Bloomberg Dollar Index, a measure against 10 major currencies, was little changed near a one-month low after a report showed manufacturing in the euro area’s 17-nation currency bloc unexpectedly expanded in July. Manufacturing in the region covered by the Fed Bank of Richmond unexpectedly shrank in July, data showed yesterday. Gold slid 20 percent this year, set for the first annual drop in 13 years and wiping $56.6 billion from the value of gold exchange-traded product holdings, after some investors lost faith in the metal as a store of value. Gold futures rose 9.7 percent in July, set for the best month since January 2012, after Fed Chairman Ben S. Bernanke said it’s too early to decide whether to begin scaling back bond purchases in September. “The renewed depreciation of the U.S dollar is shoring up gold,” analysts at Commerzbank AG wrote today in a report. “The risk of an abrupt end to the U.S. Fed’s quantitative easing monetary loosening policy has dwindled again recently. Gold is likely to find it relatively difficult to rise above the $1,400 mark, for we believe this would require the ongoing selling by gold ETF investors to come to an end.” Gold for December delivery rose 0.6 percent to $1,342.90 an ounce by 7:47 a.m. on the Comex in New York. Prices reached $1,349.20 yesterday, the highest since June 20. Futures trading volume was 12 percent above the average for the past 100 days for this time of day, according to data compiled by Bloomberg. Gold for immediate delivery in London lost 0.2 percent to $1,342.76.
ETP Holdings:
Gold ETP holdings fell 2.8 metric tons to 1,971.7 tons yesterday, the lowest since May 2010, data compiled by Bloomberg show. The Fed currently buys $85 billion of debt each month. “After the recent rally, bullion may consolidate in the near term,” said Mark To, head of research at Wing Fung Financial Group, a Hong Kong-based precious metals trader and refiner. “Gold has been pressured by the expectation of a slowdown in the pace of asset purchases by the Fed. Any sign of weakness in the U.S. economy will help gold.” Silver for September delivery rose 0.4 percent to $20.335 an ounce in New York. Palladium for September delivery fell 0.3 percent to $737.10 an ounce. Platinum for October delivery was 0.4 percent higher at $1,448.90 an ounce.
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