Gold and Silver Decline After China Growth Slows

Wall St. Cheat Sheet

On Tuesday, gold (NYSEARCA:GLD) futures for June delivery, the most active contract, fell $12.40 to close at $1,408.80 per ounce, while silver (NYSEARCA:SLV) futures for May dropped 51 cents to finish at $22.82.

Both precious metals declined as manufacturing activity in China slowed in April. The preliminary reading of the HSBC China Manufacturing Purchasing Managers Index fell to 50.5 last month, compared to a final reading of 51.6 in March. A reading above 50 indicates growth, while a reading below 50 shows contraction.

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Christopher Vecchio, currency analyst at DailyFX, explains, “Although the index remains in expansion territory, it’s clear that the uptick in government-backed Chinese data the past few weeks (notably the jump in M2 Money Supply growth as well as increased New Yuan Loans) was not due to a rebound in the economy, but rather efforts to cushion the blow from impending slowdown in growth. We should thus be bracing for ‘slower’ Chinese growth in 2013, hovering in the mid-+7.5 percent y/y range.”

By the end of the day, the SPDR Gold Trust (NYSEARCA:GLD) fell 0.74 percent, while the iShares Silver Trust (NYSEARCA:SLV) dropped 1.95 percent. Gold miners (NYSEARCA:GDX) such as Yamana Gold (NYSE:AUY) and Barrick Gold (NYSE:ABX) both declined about 2.3 percent. Meanwhile, First Majestic Silver (NYSE:AG) plunged 3.8 percent.

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Disclosure: Long EXK, AG, HL, PHYS