China’s large fund injection and gold’s reaction
In overnight news, China pumped more liquidity into its domestic banking system with it now adding 365 billion Renminbi so far this week. Even though this is the largest weekly fund injection ever for China, the precious metals reacted fairly mutedly to the news. Instead, it seems the metals were waiting for the US to start its day in order to see the broader market’s reaction to the bevy of economic news out here.
US Durable Goods Orders m/m in August were a whopping negative 13.2% versus an expectation of minus 4.7%. This was predominantly due to lower airplane and auto bookings but nonetheless, it was the largest drop in three years. While Durable Goods and pending home sales in August, which came in at -2.6% versus an expected -.4%, were a disappointment, Unemployment Claims came in slightly better than expected at 359k.
After a three day slump, gold finally started to rally once the US session began today. Yesterday it found solid bids in the low $1,740s and participants still seem keen to jump in on the long side. It has some work to do in order to break through the consolidation we have seen the past two weeks around $1,760 – $1,770. But given the macro picture, higher prices should be achievable in the next several weeks with $1,800 clearly on the radar.
