Gold News & Info

Source: American Gold Exchange

Austin— Gold slid 0.8% as risk assets fell across the board on renewed worries that an economic slowdown in China will reduce demand for goods and materials. Commodities, equities, and oil all traded lower after BHP Billiton Ltd., the world�s biggest mining company, reported that China�s steel production is slowing, another sign of weakness in the economy that was heretofore driving the global recovery. Last week, as a result of reduced exports, China posted a whopping monthly trade deficit of nearly $31.5 billion in February, its largest since 2000; and the week before, its growth target was cut for the first time since 2005. The dollar and U.S. Treasury bonds strengthened on safe-haven inflows following today's news. Silver dropped 2.2%, platinum 2.3%, and palladium 1.6%.

At the close: April gold shed $13.40 to $1,653.70; May silver lost 71 cents to $32.26; April platinum slid $30.50 to $1,654.20; and June palladium lost $11.60 to $696 an ounce.

Upbeat recent economic data in the U.S. has led many to believe that serious GDP growth in the 3.5% to 4% range is just around the corner, and the U.S. will be able to pick up China's slack in the global recovery. This optimism is one reason why the market discounted the likelihood of more monetary easing from the Fed, causing gold to drop more than 3% last week. But as Zero Hedge reported today, Goldman Sachs chief U.S. economist, Jan Hatzius, believes this optimism is unfounded and GDP expectations should be lowered to 2% from current projections of around 3.5%.

The case for higher growth, Hatzius says, has been distorted by three factors. Unseasonably warm weather has pulled economic activity from spring into winter; a massive accumulation of inventory has padded the manufacturing index numbers; and higher gasoline prices have yet to impact consumers fully. "Our bottom line," he concludes, "is that there are several reasons to believe that the recent data may have overstated the strength of the U.S. economic data."

Interestingly, Federal Reserve Vice Chairman William Dudley gave almost exactly the same analysis yesterday in a speech on Long Island. According to Bloomberg, Dudley told an association of business groups that "the economy has shown signs of strength partly because of inventory building and unseasonably warm weather," and that "the economy still faces significant headwinds and there are some meaningful downside risks." When asked whether QE3 was off the table, he asserted that "nothing has been decided." In this statement he was univocal with his fellow FOMC voting member John Williams, who said last week QE3 is "definitely not off the table" because the recovery is fragile.

Goldman's Hatzius believes "QE3 is still very much alive" and will be announced at the FOMC meeting on April 21. With two key members of the FOMC making recent speeches more or less supporting, if not explicitly recommending, another round of easing, we wouldn�t count it out�or a major gold rally if and when it's announced.