Silver spot price clipped by mixed US factory reports

on Feb 4, 2014
Updated: Oct 21, 2019

**, Tuesday 4 February:**

The spot price of silver yesterday rose to $19.625 after data showed that the US manufacturing sector lost steam in January, but the precious metal quickly coughed up its gains as the market questioned the accuracy of the worse-than-expected reading.
ISM’s US Manufacturing PMI for January checked in yesterday at 51.3, missing by a wide margin the median analyst estimate for 56.2 and December’s 57.0. The markets reacted particularly negatively to the new orders component of the survey, which registered its largest one-month contraction in 33 years.

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However, Markit chief economist Chris Williamson thinks there is no need to panic, pointing to the divergence of ISM’s measure for new orders from similar gauges like the official US factory orders and from Markit’s New Orders Index (see chart below). Williamson believes that the steep fall in ISM’s new orders index for January “needs to be viewed as a hit from the cold weather plus – and most importantly –a correction from misleadingly high readings late last year”.

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The just-released US Factory Orders for December, as issued by the Census Bureau, indicated a drop of 1.5 percent month-on-month. The market consensus had been for a more pronounced decline of 1.9 percent, following November’s 1.5 percent gain, revised down from 1.8 percent.

Spot silver is currently printing new intraday highs, with the latest at $19.415 and with the mixed factory orders report seemingly not unnerving the precious metals bulls.
Yesterday the Indian government cited volatility in global prices as the reason for cutting the import duty on gold and silver to $404 per ten grams and $435 per kilogram respectively. Hitherto, the tariff for gold imports stood at $407 per ten grams, while that on silver was at $663 per kilogram.

The unprecedented rise in silver bullion imports last year forced the Indian government to hike the import duty on silver to 15 percent in December, so making it equivalent to that of gold. The move paid off as silver imports plunged by 60 percent y/y in January.


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