Is Gold Traded On China Or US?

Investment Advisor & Author @ Sunshine Profits
January 8, 2016

China goldGold dips from a 2-month top as the Chinese stock market stabilizes today after another panic selloff yesterday. Does it mean that the yellow metal is now traded on news about China?

On Thursday, amid the depreciation of the yuan, Chinese equities plunged more than 7 percent in the first half hour of trade, forcing the stock market exchange to suspend trading for the second time in a week. As the situation stabilized, gold gave up the gains.

However, this does not necessarily means that gold is not traded on U.S. economic news. Indeed, on Monday, when gold rose, the ISM index revealed a decline from 48.6 percent to 48.2 percent in December. It means that economic activity in the manufacturing sector gauged by this index contracted in December for the second consecutive month. On the same day,  U.S. construction spending for November unexpectedly sank 0.4 percent. On Wednesday, orders for goods manufactured in U.S. factories declined 0.2 percent for November, while the December FOMC minutes were dovish.

And today, the December Nonfarm Payroll Report will be released, therefore gold may be under downward pressure, especially that theADP data showed strong private-sector job growth. However, there are arguments that the price of gold will not react strongly to the Employment Report, since it is rather certain that the Fed will not hike before March, no matter how many jobs the U.S. economy will create. In general, the December FOMC minutes suggest that in 2016 inflation reports may be more important than labor market data for the gold market, since the Fed officials are happy with the labor market (so far), but see important uncertainty associated with low inflation.

The bottom line is that gold was traded this week both on news about China and the U.S. As the Chinese authorities calm the markets, the attention will focus on the American economy, even more so since the December Nonfarm Payroll Report is set to be released today.

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Arkadiusz Sieron

Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Arkadiusz Sieroń received his Ph.D. in economics in 2016 (his doctoral thesis was about Cantillon effects), and has been an assistant professor at the Institute of Economic Sciences at the University of Wrocław since 2017. He is a board member of the Polish Mises Institute of Economic Education, author of several dozen scientific publications (including in such periodicals as the Journal of Risk Research, Prague Economic Papers, Quarterly Journal of Austrian Economics, and Research in Economics), and a regular contributor to and His two books, Money, Inflation and Business Cycles and Monetary Policy after the Great Recession, are both published by Routledge. Arkadiusz is also a certified Investment Adviser, a long-time precious metals market enthusiast, and a free market advocate who believes in the power of peaceful and voluntary cooperation of people.

It is estimated that the total amount of gold mined up to the end of 2011 is approximately 166,000 tonnes.

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