Fed Doves Sent Gold and Silver Up, Metals Down on Eurozone Economic Data

SHANGHAI, Jan. 17 (SMM) – As the Fed doves expressed their support to easing policies and as the Japan’s Prime Minister Shinzo Abe’s remark strengthened expectation on monetary easing.

The US is confronted with debt ceiling talk after avoiding the fiscal cliff, combined with the fiercer debate among the US leaders, most market players remained cautious.

The economic data for Germany and France were reported satisfactory, but those for other eurozone countries slipped, weighing down the Euro. 
 
Eurozone Industrial Output Falls, Weighing Down Euro
Data released by the Eurostat January 14 showed that industrial output fell 0.3% on the month in November and by 3.7% on the year due mainly to the weakness in south Europe. That compared with a 1.0% monthly fall in October and a 3.3% drop on the year. The October data were revised after previously being reported as falling 1.4% on the month and 3.6% on the year.

November industrial output data for Ireland, Spain, Greece, Italy and Portugal also fell from October. Industrial output in Germany was up 0.1% MoM and that in France was up 0.5%.  
 
Debates on Debt Ceiling Keeps Metals Market in Caution
The US President Barack Obama stated that the US economy may strengthen in 2013 and expressed his willingness to make moderate adjustment to government spending on welfare. However, he refused to negotiate with the Republicans on debt ceiling issue and appeal for raising debt ceiling unconditionally, claiming that the spending cuts and debt ceiling should be kept as separate issues.

The Fed Chief Ben Bernanke urged congressmen to increase debt limit on Monday so as to avoid defaults. He also warned that the US economy may still be threatened by the political deadlock. This has greatly depressed metals market, while precious metals were favored as safe havens.

Precious Metals Favored Due to Expectations on Easing Policies
The Fed Chief Ben Bernanke noted while delivering a speech on the US economic recovery and monetary policies that the US economy was still growing mildly and the easing policies are expected to be retained, buoying gold and silver markets. 

John C. Williams, President of the Federal Reserve Bank of San Francisco said Monday that the Fed’s bond buying program should last for long time till the Fed achieve its goal for improving employment and economy.

The Federal Reserve Bank of Atlanta President Dennis Lockhart also pointed out that no negative influence from the quantitative easing was seen in financial market, and any speculations about when the Fed will lower or cease the asset purchase are inappropriate.

President of the Federal Reserve Bank of Chicago Charles Evans said the Fed’s monetary easing conducted starting in 2012 will help boost the country’s economy without pushing up inflation.

Market Boosted by Remarks of Japanese Prime Minister
The Japanese Prime Minister Shinzo Abe also said Japan’s central bank set the inflation target for medium-term, instead of long-term, at 2% so as to show its determination to eliminate the deflation lasting for nearly 20 years through loosening monetary policies. This has boosted market expectations on quantitative easing in Japan, benefiting gold market.
 
Analysis 
China Futures:
Although opinions on easing policies have been divided among Fed officials, the employment and inflation targets set by the Fed meant that the QE measures will unlikely be terminated in the short term. Besides, the large proportion of doves in the Fed also ensures the sustainability of QE policies. Market should focus on Ben Bernanke’s speech.

Wanda Futures:
As the long-expected pre-holiday replenishments were still not seen, metals market may be negatively affected. However, metals prices should gain certain support from the positive economic data released last week. Thus, SHFE copper prices should remain vacillating, with investors awaiting improvements of downstream demand.