In October, industrial production declined significantly in India. According to data published recently by the Indian government, and the weakness of industrial production in the country increased by 5.1% compared with the same period last year, and observers in the market started to worry about the economic development of India. In recent years,
months an increasing number of foreign investors have been withdrawing their capital and the Indian rupee has been under strong sales pressure. After this data were released both gold and silver prices were under sales pressure. In today's early Asian trading, gold and silver prices could not detach from the price depreciations in other asset markets.
Indian industrial production data for October turned out to be much lower than economists and analysts had expected. This indicates that it will be very difficult for Asia to detach from the economic problems of the eurozone and the US. Indian data came as a shock for many market participants, as expectations that the BRIC states (Brazil, Russia, India and China) might be able to detach from the economic problems of the industrialised countries wane. The same developments took place during the financial crisis in 2008, when emerging markets suffered a significant slowdown. Nevertheless, the extent of the slowdown in Indian industrial production is still remarkable, since October production has dropped to the same level it was at in the first quarter of 2009, during the peak of the financial crisis.
A rising dollar once again caused precious metal prices to drop in today's early Asian trading. During the morning session the US Dollar Index (USDX) climbed up to 79.0. The gold spot price dropped underneath the $1,700 mark and stood at $1,680 per troy ounce at the beginning of the European session. This depreciation in the gold price also affected the silver price. The white metal hit a minimum of $31.20 per troy ounce, but was able to recover slightly afterwards. Concerns remain about liquidity problems in the European banking sector. A report last week from the European Banking Authority states that the continent’s largest banks must raise approximately €115 billion’s worth of capital. This will of course mean reductions in their borrowing and lending, which will have a further depressive effect on the eurozone economy.
Despite the announcement last Thursday by the European Central Bank that will provide the regional banking system with generous allocations, and capital markets at the present time a lot of suffering forced liquidations by institutional investors and hedge funds. Gold and silver did not remain immune to this trend, but remain some of the best assets to hedge against inflation and systemic risk.
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