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Gold in demand, supply delays hurting industry, manufacturing

gold bars

The S&P/ASX 200 was down 0.3% at the open but the index closed slightly higher on Thursday. US futures are edging up but markets across Asia are mixed. The NZX 50 closed 0.4% lower.

The Australian dollar has been strengthening and is consolidating around US74.73c. Bitcoin is up slightly at US$42,800, cash gold is slightly weaker at US$1940.05 an ounce and crude oil is slightly down on the highs reached this morning. Brent crude oil has dropped below US$122 a barrel to US$121.65 this afternoon and WTI down slightly at around US$115.83/bbl. 

Geopolitical uncertainties surrounding the Ukraine conflict continue to drive demand for the safe-haven gold amid speculation that the West plans to announce more sanctions against Russia for the invasion of Ukraine.

In Australia, Crown Resorts will be allowed to continue to operate and will have two years to put its Perth casino into order after the Western Australian Royal Commission into the venue found Crown was not suitable to hold the state’s gaming licence. Shares were slightly higher by the close of the day's trading session, which was led by gains in the energy and industrials sectors.

The IHS Markit Australia Manufacturing PMI rose to 57.3 in March of 2022 from 57 in February. This marked 22 months of successive stronger conditions in the manufacturing sectors, with the latest improvement the most marked in three months.

New order growth accelerated, as a lessening of Covid-19 disruption led to the increase in demand. In turn, employment levels and purchasing activity continued to rise, contributing to higher stocks of purchases.

Input costs and output prices rose at faster rates, due to shortages and rising costs of raw materials, attributed to disruptions from both Covid-19 and the Ukraine war.

The IHS Markit Australia Services PMI rose to 57.9 in March of 2022 from 57.4 in February, marking a second consecutive month in which Australian services output expanded and at the fastest pace since May 2021, flash estimates showed.

Business activity rose at a faster rate amid overall demand; new export business returned to growth as travel restrictions eased and, in turn, service providers hired at faster rate.

Input cost and output price inflation surged to record rates, amid higher fuel costs and wages, while global supply chain constraints and issues of flooding and Ukraine conflict also pushed up overall input costs.

Australia’s economy is running hot and yet businesses describe the extended supply delays and spiraling costs of the current working environment as among the toughest they’ve encountered, reports Bloomberg.

“It’s a very challenging investment environment right now,” said Carlos Cachos, chief economist at Jarden Securities Ltd. He said constraints were “felt hugely” in the industrial and manufacturing sectors. “We have seen some high-profile insolvencies in construction businesses and more are to come.”

Jarden has analysed 37 economic indicators including PMIs and business surveys from the past 30 years to create a new supply-chain index for Australia. The data suggests that supply and inflationary pressures are near record levels. Firms are still keen to expand capacity to tap pent-up consumer demand in the booming economy, but their plans are being hampered, Cachos said. 

The International Monetary Fund is backing New Zealand’s central bank to curb a growing inflation threat.

“Given New Zealand’s strong cyclical position and inflationary pressures, significant increases in the official cash rate in the near term are appropriate,” the IMF said in the Concluding Statement of its Article IV review of the economy, released Thursday in Wellington. While monetary policy should remain data dependent, “continued, swift policy normalisation will be appropriate under baseline conditions,” it said.

Tencent reported its slowest quarterly revenue growth on record in the fourth quarter of 2021. Revenue came in at 144.18 billion yuan (US$22.62 billion), up 8% year-on-year. The Chinese technology giant continues to feel the impact of Beijing’s regulatory tightening on the domestic technology sector.

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