Gold Takes Pounding, Wall Street Slumps on China GDP, Weak US Data

Andrew Klips  |

The Dow Jones and S&P 500 are falling back on Monday to put a little distance between their record levels hit last Thursday on news of Chinese gross domestic product coming in short of expectations, signaling that the world’s second biggest economy is growing slower than hoped. Adding further pressure on the markets is worse-than-expected data from the U.S. and gold prices going through a meltdown.

While just about any other country in the world would love to report the 7.7 percent growth in gross domestic product in China during the first quarter as compared to the year earlier period, it didn’t measure-up to most economist predictions. Most experts were expecting growth of at least 8 percent for the leading country. The GDP growth was also slower than the 7.9 percent increase in the fourth quarter of 2012. Asian markets tumbled across the board with the report from Chinese officials.

Precious metals had already been limping along in 2013, with the rate of depreciation accelerating in recent weeks, including gold futures taking a hit of $63.50 per ounce on Friday, the largest one-day drop since February 2012. The fall seemed paltry versus the pummeling Monday morning that saw gold for June delivery crash through technical supports and lost about $100 per ounce to fall as low as $1,384.60. Those contracts were trading at $1,600 per ounce at the start of April.

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Other metals were also hit hard with the report from China. Silver for May delivery plunged more than 11 percent to near $23.00 per ounce. May Copper, for which China is the world’s biggest consumer, doffed-off about 4 percent to fall below $3.20 per pound at one point.

Oil joined the fray as well, falling about 3 percent to touch $88.00 in early action.

The latest reading of the New York Fed Empire State Index showed a drop to a 3.1 level for April, down from 9.2 in March, marking the lowest level since January. Readings above zero indicates better manufacturing conditions for the New York region according to respondents, but the April level was well below economist predictions of a 7.8 mark. The new orders component of the index dropped from 8.2 in March to 2.2 in April. On the bright side of the report, the employment component increased from 3.2 in March to 6.8 in April. The Empire State Index doesn’t carry as much weight as other manufacturing data such as that from the Institute for Supply Management or that of the Federal Reserve Banks. The Philadelphia Federal Reserve will be delivering its latest manufacturing index report on Thursday.

If that wasn’t enough, the National Association of Home Builders/Wells Fargo housing market index whiffed on meeting expectations this morning. The index, which is a measure of homebuilders’ confidence and perceptions of current home sales now and in the next six months, fell from 44 in March to 42 in April, shy of predictions of an increase to 46 for the month.

The raft of poor data has quelled the roar of the bulls Monday morning, with the Dow lower by nearly 100 points, the S&P 500 off by 12 points and the Nasdaq carving away 28 points.

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