Gold is seeing some buying interest today as stocks, the dollar index and crude oil are all rising.
The People’s Bank of China yesterday once again took action to try to stoke economic activity. The central bank eased the reserve ratio for banks in a move designed to bolster lending. This move by the central bank comes just days before top Chinese leaders meet in Beijing for the so-called two meetings. China is likely trying to demonstrate to the world that it will continue to fight slowing economic conditions and capital outflows. Concerns over the globe’s second largest economy have been a thorn in the side of global equity markets recently. The latest move represents the fifth time the central bank has cut the reserve requirement since the beginning of last year.
Clearly, The People’s Bank of China has a challenging situation to deal with. Too much lending in recent years has left China in what some analysts consider “bubble” territory. The central bank must, however, figure out a way to nurture growth and stem the outflow of capital amid the current economic slowdown. Chinese stocks have thus far lost about a quarter of their value this year, and before the central bank’s announcement Monday were lower by nearly three percent.
Ongoing challenges in China have kept investors on their toes and perceived safe-haven assets like gold could potentially see further benefit if conditions do not improve.
Investors also continue to contemplate the Federal Reserve’s plans regarding interest rates. Rate expectations have shifted in recent weeks amid the ongoing turmoil, and the central bank has reiterated its stance that any decisions on rates would be data driven.
This week, markets will get the latest readings on Chicago PMI, Dallas Fed Manufacturing, PMI Manufacturing, Motor Vehicle Sales, ISM Manufacturing, Construction Spending, Beige Book, MBA Mortgage Applications, Weekly Jobless Claims, Productivity and Costs, Factory Orders, ISM Non-Manufacturing and the Non-Farm Payrolls data for February.
Non-farm payrolls are expected to show a significant rise from January’s reading of 151,000. Consensus estimates are looking for an increase of 190,000 jobs with the unemployment rate likely steady.
Gold continues to show impressive strength. even with higher stocks and could be poised for further upside. Gold has seen some smaller trading ranges in recent sessions and could potentially be gearing up for a fresh leg higher in price.