Gold Off 2-Week Low as Dollar Slips After Weak Manufacturing PMI, Silver ETF 'Steadier'

EDGWARE (Scrap Monster): Gold bullion rallied 0.7% from new 2-week lows in London trade Thursday as the Dollar dropped following the weakest data on US manufacturing activity since 2013.

New York stock markets also slipped after the Institute for Supply Management said its manufacturing PMI index fell last month from 51.1 to 50.2 – only just showing expansion.

Financial data providers Markit also said their survey of manufacturing purchasing managers held near 2013 lows.

Gold recovered to $1118 per ounce as the US Dollar fell on the FX market. 

Silver bullion rose faster, adding 1.4% from its own new 2-week lows at $14.49 per ounce.

"US manufacturing growth is essentially flat," says a metals market note from US brokerage INTL FCStone, "especially if automobile production is taken out of the mix.

"Nevertheless, the general consensus is that the Federal Reserve is still going to raise rates sometime this year."

Ten-year US Treasury yields fell as bond prices rose after the manufacturing PMIs Thursday, hitting fresh 5-week lows of 2.03%.

But interest rate betting in the futures market still put the odds of a Fed rate hike in October around 1-in-10, with odds nearer 2-in-5 for 'lift off' at the December meeting.

Thursday's earlier "weakness" in the gold price," says German bank Commerzbank, "also dragged the prices of silver, platinum and palladium down with it, though their losses have been limited thanks to the firm base metal prices."

"Lower lows and lower highs make for a short-term bearish trend," said bullion bank Scotia Mocatta's daily chart analysis Wednesday night.

Should this trend contine, "[it] will run into technical support at $1100 from September 11th. Moving average resistance now comes in near $1130."

Despite yesterday's drop in gold prices, however, the giant SPDR Gold Trust (NYSEArca:SLV) yesterday needed a further 3 tonnes of bullion to back its shares in issue, taking the total to a 10-week high after growing in size for 4 days in a row last week – a run not seen since September 2012.

Totalling 687 tonnes, however, the GLD's holdings have nearly halved from their peak of three years ago.

The giant iShares Silver Trust (NYSEArca:SLV) has meantime added 10 tonnes from last week's new 4-month low of 9,898 tonnes, but the number of shares outstanding – and so the quantity of bullion held to back them – remains almost 10% beneath 2014's highs.

"Total silver ETF holdings [unlike gold] have remained relatively stable since 2013," says a note from precious metals analysts Thomson Reuters GFMS, in part because those trust funds tend to appeal to private "retail" investors.

Gold ETFs, in contrast – and appeal more to "managed money" investors – "have been on a declining trend since the beginning of the year," GFMS adds, with total holdings across the space "down 4% intra-year...recording a 9% decline year-on-year" despite the upturn seen since the US Fed's surprise 'no change' announcement mid-September.

Courtesy: www.bullionvault.com