22-Sep (USAGOLD) — Gold has extended losses back toward the low end of the 5-week range as a plethora of weak data fuels concerns over global growth risks. This has weighed heavily on stocks, as well as the commodity complex today. Most commodity funds and indexes have a gold component, so in exiting these instruments, investors are also selling gold; even if they believe gold is where they really want to be. As stocks fall, investors must frequently liquidate profitable positions (including those in gold) to cover margin calls.

The “risk-off” mindset has fueled flows into dollars and low yielding sovereign debt like US Treasuries, German bunds and JGBs. The dollar has gotten an additional boost to new 7-month highs as a result of persistent sovereign default woes in Europe, which have pushed the euro below 1.3400 for the first time since January. The general inverse correlation between the dollar and gold may also be fueling some speculative interest on the short side of the yellow metal, but as we’ve seen recently, these types of breaks have attracted strong buying interest in the physical market.

Finally, given dubious success of past quantitative easing measures, there seems to be a growing consensus that the Fed’s Operation Twist that was announced yesterday — the swapping of $400 bln in short-term Treasuries for an equal amount of longer-term Treasuries — has little chance of reinvigorating the moribund US economy.

• US initial claims -9k to 423k in the week ended 17-Sep, above market expectations, vs upward revised (again!) 432k in previous week.
• Canada retail sales -0.6% in Jul, below market expectations of -0.3%; ex-autos flat, also below expectations.
• UK CBI Industrial Trends Monthly – Total Orders -9 in Sep, below market expectations of -5, vs +1 in Aug; Export orders -12.
• Eurozone Reuters PMI – Composite (advance) fell to 49.2 in Sep, below market expectations, vs 50.7 in Aug; Mfg 48.4, Servs 49.1.
• Eurozone industrial orders (sa) -2.1% m/m in Jul, well below market expectations of -1.2%, vs negative revised -1.2% in Jun; 8.4% y/y pace.
• Eurozone Flash consumer confidence edged lower to -17.0 in Sep, below market expectations, vs -16.6 in Aug.
• New Zealand Q2 GDP weaker than expected at just 0.1% q/q.
• China HSBC/Markit Flash Manufacturing PMI 49.4 in Sep, below expectations, vs upward revised 49.9 in Aug.
• Taiwan unemployment rate (sa) ticks lower in Aug to 4.36%, vs 4.37% in Jul.