(As of 7:15 am PST)
A major selloff in gold
continues this morning as investors in the precious metal reacted to negative
Chinese growth data. Gold futures
tumbled to their lowest level in 2 years, down 6% this morning, after closing
down 4% on Friday. Many factors are
contributing to the metal’s decline including a break through a key downside
support level that many technicians were watching on Friday. Many banks have cut their target forecasts on
gold prices and fears over central bank sales of gold have added to the
breakdown. Chinese GDP growth for the
most recent quarter slowed to 7.7%, down from 7.9% in the 4th
quarter and well below the 8% expectation.
Chinese retail sales slowed as well in March. Adding to the downward pressure, JP Morgan cut
its outlook on China’s 2013 GDP to 7.8% growth from its previous forecast of
8.2%. The World Bank, in a statement
today, warned broader Asian economies of a risk of “overheating” and to
consider abstaining from future stimulus measures. The agency warned of risk of certain asset
bubbles throughout the region as several stock market indices have surged over
the past two years. On the domestic
side, the Empire State index showed manufacturing activity slowed in April,
supporting other data we’ve seen recently of an anticipated slowdown in
activity in the second quarter. The risk off sentiment has spread to global
markets today with Europe and Wall St. trading in the red. Interest rates are flat and volatility has
picked up as the gold selloff has spooked investors that the QE/gold
relationship may be breaking down.
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