Morning Snapshot

13-Mar (USAGOLD) — Gold is lower this morning, weighed by weaker than expected Q1 GDP in China and a pretty tame CPI print here in the States. Nonetheless, the yellow metal is up nearly 2% on the week, largely because of a rebound in QE3 expectations.

Stocks and gold surged yesterday, lifted by a whisper that China’s Q1 GDP was going to beat expectations and come in around 9%. That proved to be a false rumor, with the actual print being 8.1%, below expectations of 8.3%, versus 8.9% in Q4. While stocks and gold are under pressure today on the miss, the yellow metal seems to be comparatively buoyant.

Perhaps it is the continued deterioration of the situation in Europe that is prompting investors to hang on to their gold. The yield on 10-year Spanish bonds climbed back above 6% on Friday, while CDS premiums hit a new all time high of 498 bps. Not surprisingly, Bank of Spain data revealed on Friday that Spanish commercial bank borrowing from the ECB surged to €227.6 bln in March, versus €152.4 bln in February. Even as the Europe’s fifth largest economy threatens to implode, the ECB has reiterated once again that it has no intention of restarting periphery debt purchases. The ECB’s position since LTRO2 has been, ‘we’ve done enough, now it’s up to the governments of Europe to do the rest’.

Given all the hoops that Greece had to jump through to secure their second bailout — which was supposed to prevent contagion to the larger economies — we’ll see how long the ECB can maintain their hardline if it turns out Spain needs a bailout as well. The late-March boost in the EFSF/ESM bailout fund was also suppose to instill a level of confidence in periphery bond buyers, but that sure didn’t last long.

European stocks were hammered today.

Data this week add to concerns about the moribund US economy as well, following a disappointing nonfarm payrolls report last Friday. Initial claims reported on Thursday saw a disturbing spike, and the previous week was revised significantly higher as well. Consumer confidence fell in April; the first decline since August 2011. If US growth slows further — or worse yet, the unemployment rate starts to edge higher — in the near-term, one might expect that further Fed measures would become all-but assured. That would in turn likely reignite a fire under the gold market.

• University of Michigan consumer sentiment (prelim) falls to 75.7 in Apr, below market expectations of 77.0, vs 76.2 in Mar.
• US CPI +0.3% in Mar, in-line expectations, vs +0.4% in Feb; 2.7% y/y, vs 2.9% y/y in Feb. Core +0.2%, in-line with expectations.
• Germany CPI (final) +0.3% m/m in Mar, in-line with expectations; 2.1% y/y.
• Spain CPI (final) +0.7% in Mar, vs 0.1% preliminary print; 1.9% y/y.
• Italy industrial production (sa) -0.7% m/m in Feb, below expectations of +0.1%, vs negative revised -2.6% in Jan; -6.3% y/y (wda).
• UK PPI Input (nsa) +1.9% m/m in Mar, vs positive revised +2.5% in Feb; 5.8% y/y, above expectations of 4.6%, vs upward revised 7.8% y/y in Feb.
• UK PPI Output (nsa) +0.6% m/m in Mar, vs +0.6% in Feb; 3.6% y/y, above expectations of 3.4%, vs 4.1% y/y in Feb.
• Singapore Q1 GDP (advance) +1.6% y/y, vs 3.6% y/y in Q4.
• Singapore retail sales (nominal) +19.0% y/y in Feb, vs upward revised +1.8% y/y in Jan.
• BoK hold steady on repo rate at 3.25%, in-line with expectations.
• China Q1 GDP +8.1% y/y, below market expectations of +8.3% and whisper of +9.0%, vs 8.9% y/y in Q4.
• China industrial output +11.9% y/y in Mar, vs +11.4% in Feb.
• China retail sales +15.2% y/y in Mar, vs +14.7% y/y in Feb.

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