Gold Dips to 34-Month Low; U.S. Stocks Rise as GDP Report Fuels Fed Stimulus Bets; China’s Central Bank Soothes Markets

Gold Dips to 34-Month Low Due to Uncertainty about Fed’s Easing (Bloomberg)

Gold fell to a 34-month low, as improving U.S. economic data strengthened the case for the Federal Reserve to reduce the Federal Reserve’s ongoing monetary policy stimulus. Silver futures slipped to their lowest mark since August 2010. Gold dropped 23 percent this quarter, heading for its biggest loss since at least 1920 in London trading. Fed Chairman Ben S. Bernanke said last week the central bank may slow its asset-purchase program this year if the economy continues to improve. U.S. durable-goods orders rose more than expected, home sales advanced to the highest in almost five years and consumer confidence climbed, data showed yesterday. Precious metals exchange-traded product offerings lost $60 billion in value so far this year as speculation grew that the Fed will taper debt-buying that helped gold conclude a 12-year bull run last year. A lack of accelerating inflation and mounting concern about the strength of the global economy is hurting silver, platinum and palladium, which are used more in industry than gold.

U.S. Stocks Rise as GDP Report Fuels Fed Stimulus Bets (Bloomberg)

Weaker-than-forecast economic growth helped to lift the stock market in early trading today as investors seemed to speculate that the Federal Reserve will keep its easy-money policies intact. The market also sidestepped any further fallout today from China’s cash crunch. Citigroup Inc. and Bank of America Corp. advanced at least 0.6 percent in early trading. The S&P 500 rose 0.8 percent to 1,600.89 at 9:48 a.m. in New York, after the equity benchmark climbed after hitting a nine-week low yesterday. The S&P 500 has lost 1.9 percent in June, paring its gains in the second quarter to just 2 percent. As far as the Dow Jones Industrial Average, it jumped 118.91 points, or 0.8 percent, to 14,879.22 today. Trading of S&P 500 companies was about in line with the 30-day average at this time of day. For now, investors worried about a summer stock market swoon may take heart that the worst declines may have occurred.

China’s Central Bank Soothes Markets (Reuters)

Thanks to a pledge from China’s central bank to prevent a credit crunch, markets in the region have calmed down. However, many expect tougher conditions going forward for the Chinese economy. “Market sentiment has apparently improved somewhat,” although the People’s Bank of China is still expected to keep its relatively tight liquidity policy, said a dealer at a state-owned bank in Shanghai.