Why positive market results in China, EU and US?

Published: 28 January, 2013 14:52

Economical growth in China Shanghai, AsiaThis past week has seen mixed results in commodities trading, with many online traders keeping careful watch on the relatively positive market sentiment emerging from China, Europe and the United States.

Much of this data serves to temporarily paint a rather bullish picture for economic growth in the short and medium-term.

Highlights included China’s manufacturing index hitting a two year high, the European purchasing manager’s index reaching a ten month apex and United States’ jobless figures emerging significantly lower than expected for the second week in a row.

Naturally, these statistics have been directly reflected in commodities trading.

The price per barrel of Brent crude flirted with a three-month high, due in part to riding on the back of a weaker dollar. Additionally, the positive economic and industrial data emerging from China and Europe has served to fuel hopes that manufacturing outputs will continues to increase.

Although the beginning of the week saw many online traders wary regarding an oversupply in crude, the news of a cut in Saudi production combined with a boost in confidence (at least for the short term) regarding the United States’ decision to raise the debt ceiling saw prices subsequently rally.

As a perceived increase in demand coupled by a weaker greenback have given Brent crude buoyancy, many commodities traders may seek to engage in profit taking in the coming days. Thus, some analysts feel there may be a slight slump in short term pricing.

As commodities traders had expected, the price of gold per troy ounce slid as a direct result of this positive market sentiment. While this is partially due to India increasing taxation on the precious metal, the main conclusion must be derived from the simple fact that positive market sentiment will see online traders cash in safe haven investments.

As long as online commodities traders continue to see better-than-expected PMI’s from the Eurozone and a strong manufatcuring output from China, the outlook for gold tends to remain neutral to mildly bearish for many investors.

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