Gold, Silver Lower on Durable-Goods Report

by Andrew Burger | March 28, 2012 12:51 pm

Gold and silver were moving lower Wednesday morning as the Census Bureau reported a smaller-than-expected increase in February durable-goods orders and news that Chinese manufacturers’ profits contracted sharply in the first two months of 2012.

Spot gold was 0.43% lower as of 11:50 a.m., having traded as high as $1,678.80 and as low as $1,667.50 an ounce, according to Kitco market data[1]. The London afternoon reference price was set at $1,676, $16 an ounce lower than Tuesday’s afternoon reference price.

Spot silver was showing a 1.1% loss, bid at $32.23, with an ask price of $32.33. The morning high as of time of writing was $32.60 and the low was $32.05. Wednesday’s reference price was set at $32.43 in the London a.m., 58 cents an ounce below Tuesday’s price fix.

New orders for manufactured durable goods[2] increased $4.5 billion, or 2.2%, in February, to $211.8 billion, the Census Bureau announced. February’s increase was the fourth in the last five months. Market consensus expectations were an increase of 2.8%.

Led by non-defense aircraft and parts, durable-goods orders for the transportation sector saw the biggest rise, up $2.1 billion, or 3.9%, to $57.9 billion, the third increase in four months. Excluding transportation, February durable-goods orders were up 1.6%.

Chinese manufacturers’ profits dropped 5.2%[3], to $95 billion, during the first two months of 2012, the biggest decline in two years, according to a China Daily report, following a strong showing in 2011. Net income among Chinese manufacturers rose 25% last year, with a jump of 34.3% in the first two months of 2011. Ferrous-metals processors suffered the largest decline among 41 industrial sectors tracked, with profits down 94%.

Falling demand for exports and continued weakness in property prices are leading China watchers to speculate that Chinese government authorities will boost investment and loosen monetary policy.

Gold bullion prices fell below $1680 an ounce in London morning trading Wednesday, 1% off their week’s high, after failing to breach $1,700 an ounce yesterday, according to BullionVault’s London Gold Market[4] report.

“We believe low interest rates and longer-term inflationary pressures should remain supportive for gold prices,” Barclays Capital wrote in a research note. Goldman Sachs reiterated its 12-month forecast for gold of $1,940 per ounce. Precious metals consultant CPM Group, in contrast, has said it does not expect gold to set new highs this year, according to BullionVault.

In U.S. stock exchange trading, gold and silver trusts were heading lower.

The SPDR Gold Trust (NYSE:GLD[5]) was lower, down around 0.47%.
The iShares Gold Trust (NYSE:IAU[6]) was down around 0.55%.
The iShares Silver Trust (NYSE:SLV[7]) was more than 1% lower.

Gold and silver mining ETFs were showing sharp losses.

The Market Vectors Gold Miners ETF (NYSE:GDX[8]) was showing losses of around 2.15%.
The Market Vectors Junior Gold Miners ETF (NYSE:GDXJ[9]) was showing losses of more than 3.4%.
The Global X Silver Miners ETF (NYSE:SIL[10]) was down more than 3.5%.

Gold mining shares were falling sharply as well.

Agnico-Eagle Mines (NYSE:AEM[11]) was showing losses of around 1.1%.
Barrick Gold (NYSE:ABX[12]) was down around 1.8%.
Eldorado Gold (NYSE:EGO[13]) was down around 2.7%.
Goldcorp (NYSE:GG[14]) was around 1.85% lower.
Kinross Gold Corp. USA (NYSE:KGC[15]) was down around 1%.
Newmont Mining (NYSE:NEM[16]) was down more than 0.4%.
NovaGold Resources (NYSEAMEX:NG[17]) was lower as well, down nearly 3.4%.
Yamana Gold (USA) (NYSE:AUY[18]) was down more than 1.9%.

Silver mining shares also were down sharply in Wednesday morning trading.

Coeur d’Alene Mines (NYSE:CDE[19]) was showing losses of more than 2.3%.
Hecla Mining (NYSE:HL[20]) was down more than 1.7%.
Pan American Silver (NASDAQ:PAAS[21]) was showing losses of approaching 3%.
Silver Wheaton (NYSE:SLW[22]) was down some 3.25%.
Silver Standard Resources (NASDAQ:SSRI[23]) was down nearly 2.9%.

As of this writing, Andrew Burger did not hold a position in any of the aforementioned securities. Adrian Ash of BullionVault contributed to this report.

Endnotes:
  1. Kitco market data: http://www.kitco.com/market/
  2. New orders for manufactured durable goods: http://www.esa.doc.gov/sites/default/files/ei/documents/2012/March/advancereportondurablegoods28february201229.pdf
  3. Chinese manufacturers’ profits dropped 5.2%: http://www2.chinadaily.com.cn/bizchina/2012-03/28/content_14928011.htm
  4. London Gold Market: http://goldnews.bullionvault.com/gold-prices-032820122
  5. GLD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLD
  6. IAU: http://studio-5.financialcontent.com/investplace/quote?Symbol=IAU
  7. SLV: http://studio-5.financialcontent.com/investplace/quote?Symbol=SLV
  8. GDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=GDX
  9. GDXJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=GDXJ
  10. SIL: http://studio-5.financialcontent.com/investplace/quote?Symbol=SIL
  11. AEM: http://studio-5.financialcontent.com/investplace/quote?Symbol=AEM
  12. ABX: http://studio-5.financialcontent.com/investplace/quote?Symbol=ABX
  13. EGO: http://studio-5.financialcontent.com/investplace/quote?Symbol=EGO
  14. GG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GG
  15. KGC: http://studio-5.financialcontent.com/investplace/quote?Symbol=KGC
  16. NEM: http://studio-5.financialcontent.com/investplace/quote?Symbol=NEM
  17. NG: http://studio-5.financialcontent.com/investplace/quote?Symbol=NG
  18. AUY: http://studio-5.financialcontent.com/investplace/quote?Symbol=AUY
  19. CDE: http://studio-5.financialcontent.com/investplace/quote?Symbol=CDE
  20. HL: http://studio-5.financialcontent.com/investplace/quote?Symbol=HL
  21. PAAS: http://studio-5.financialcontent.com/investplace/quote?Symbol=PAAS
  22. SLW: http://studio-5.financialcontent.com/investplace/quote?Symbol=SLW
  23. SSRI: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSRI

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