Lower Consumer Confidence, Expectations Drive Markets Lower: Morning Market Update Oct 1

Consumer confidence in the U.S. dropped to a surprising 4-month low with a reading of 86 for September, down from 93.4 in August. The index had risen the four months previous, and August saw its highest mark since 2007, before the financial crisis. Consumer expectations for the next 6 months also plummeted from 93.1 in August to 83.7 in September. While this may indicate less consumer spending in the coming months, measures of consumer sentiment are notoriously volatile.

The fall in consumer confidence was the biggest drop in the course of one month since the stock-market-downgovernment shutdown last October. This sparked some safe haven buying, as gold jumped back above the $1,215 level early in trading. Stocks were mostly down Wednesday morning, with the Dow Jones losing over 100 points to slide below the 17,000 mark.

Yesterday in the Markets

The precious metals continued to fall, particularly silver and palladium:

Gold: $1,208.15 (-$7.66) -0.63%
Silver: $16.98 (-$0.52) -2.98%
Platinum: $1,301.00 (-$7.00) -0.54%
Palladium: 773.30 (-$17.19) -2.17%

Oil prices were sharply lower on Tuesday:

WTI Crude: $91.70
Brent Crude: $95.03

The major U.S. stock indices ended Tuesday largely unchanged:

Dow Jones: 17,042.90 (-28.32) -0.17%
S&P 500: 1,972.29 (-5.51) -0.28%
Nasdaq: 4,493.39 (-12.46) -0.28%

Economic News Affecting Gold

The strength of the dollar continues to push gold lower, as the yellow metal posted its steepest monthly loss since earlier this spring. It is poised to retest its lows of December and January, when gold dropped below $1,190. The dollar remains at 4-year highs; conversely, silver is stuck at a 4-year low, closing below $17 for the first time since March 2010. The weak performance of silver and copper have pulled the rest of the metals lower, as the slump in prices has sparked heavy trade volume on the markets.

News broke yesterday that after months of resisting doing so, the online auction site eBay will spin-off its subsidiary company PayPal. Many analysts and activist investors had been calling for eBay to take this measure as early as February, as most expect PayPal to grow considerably as electronic payment platforms become increasingly popular. After rebuffing the pundits, eBay came to the decision on its own time, and plans to finalize the split from PayPal sometime in 2015–although the two companies will retain certain synergies through a continued corporate relationship.

Geopolitical News Affecting Gold

gold-elephantIndia’s annual Diwali festival is slated to kick-off on October 23, beginning with Dhanteras. This is the number one gold-buying event in the world, as Indian tradition recognizes the Diwali season as the most auspicious time to purchase gold as gifts to ensure the recipient gets the maximum benefit and good fortune from the gesture. As is typically the case, premiums on gold in the Indian markets are expected to rise, perhaps by as much as 100%. This, however, is unlikely to deter demand.

In China, ScotiaBank has admitted (as many have long suspected) that the officially published demand for gold in the People’s Republic is far lower than real demand. Officials from the bank claim that China’s annual gold demand, excluding the central bank, is about 2,200 tonnes; this is more than twice the estimate put forward by the World Gold Council (1,000 tonnes)! The suppression of demand data from China fits with the idea that the People’s Republic would like to keep the full extent of its gold reserves under wraps until a time when it can potentially offer gold convertibility for the yuan.

The Hong Kong demonstrations are starting to take a serious toll on the local economy, as it is estimated that more than $5 billion in economic activity has already been lost at the shopping malls and office buildings disrupted by the protests. This is an especially important time for the Hong Kong commercial sector, as Chinese vacationers come to the commercial center to buy gold and other luxuries during the week of national holidays. In addition to demanding open and fair elections, the demonstrators are also calling for the immediate removal of the city’s head official, Leung Chun-ying (or C.Y. Leung).

In the Donetsk region of Ukraine, a school was shelled (on the first day of classes), killing four. Despite the ceasefire brokered by the two sides on September 5th, intermittent violence and attacks have continued. Naturally, each camp is blaming the other for the attack; what remeains clear is that the conflict shows no signs of being quickly resolved. As has been a theme with the war in Ukraine, gold spiked on the news of the shell before easing back on the absence of further concrete developments.

Looking Ahead

With no end in sight to the Hong Kong protests, and each side ramping up the rhetoric, the next development in the massive student movement will provide clearer indications of how risky or unstable the situation has become. While stocks have generally tracked with the tenor of economic data in evaluating the global recovery, disruptions to major economic players (as Hong Kong is) almost invariably drive safe haven demand for gold and precious metals.

 

by Everett Millman

Gainesville Coins Portfolio Tracker and Financial News

1933 Saint-Gaudens Double Eagles Case May Get Second Hearing

The Saint-Gaudens Double Eagle is considered by many the most beautiful U.S. coin design.

The Saint-Gaudens Double Eagle is considered by many the most beautiful U.S. coin design.

Apparently, this case is not quite “closed.”

The family that found 10 of the “illegal to own” 1933 gold double eagle coins in a safe deposit box is scheduled to appear in court in November for a review of the 2011 judgment that the coins still belong to the U.S. government.

According to CoinWeek, a panel in the Third Circuit of the U.S. Court of Appeals (located in Philadelphia, PA) will review arguments by both sides (the government versus the Langbord family) to determine the fate of the priceless coins. The coins were discovered in the safe deposit box of the Langbord’s deceased patriarch, and were given to the U.S. Mint for authentication–at which point the Mint and the Treasury Department deemed the specimens to be the property of the U.S. government. (Shocking, ain’t it?) This stance relies on the argument that although some number of 1933 double eagles were struck, none were intended to be issued and therefore they did not receive legal tender status.

The Saint-Gaudens gold double eagle has a reputation as one of America’s most beloved coins, as well as bearing the largest denomination ($20) of any circulation-strike coin in U.S. history. Among the rest of the coins in the series, the elusive 1933 Saint-Gaudens is by far the most coveted, as just one example–originally from the private collection of Egypt’s infamous King Farouk–is known to exist in private hands; prior to the discovery of these ten specimens, it was believed the rest of the 1933-dated double eagles were confiscated and melted down.

The outcome of this case could be groundbreaking: a reversal would likely bring ten desperately sought-after examples of the 1933 Saint-Gaudens into the market, while a failed appeal would considerably strengthen the Mint’s position on confiscating “experimental” strikes that were never officially monetized, much like the ongoing controversy involving the aluminum 1974-D Lincoln penny.saint-gaudens

Whatever the result, the November 20th decision is sure to draw the undivided attention of the numismatic community, which is typically the case whenever the 1933 Saint-Gaudens double eagle is mentioned!

 

by Everett Millman

Gold Rebounds on Chicago PMI Miss: Morning Market Update Sept 30

After slipping below $1,210, gold rebounded this morning on the release of the Chicago PMI, which came in at 60.5, far below expectations of 64.3. We are entering a period of “bad news is good news” for gold, as continually poor economic data from Europe is applying some upward pressure on the metal.

The dollar also jumped above 86 on the DXY index in response to the euro dropping to a two-year low. The euro is currently trading at just under $1.26 relative to the dollar.

Yesterday in the Markets

Stocks in emerging markets were pulled down by the political unrest in Hong Kong, as Brazilian stocks dropped -4.5% and the bear market continued for Russian stocks, which gave up -2.6%. The demonstrations also drove safe haven buying of U.S. Treasuries, as the yield on the 10-year note dropped 5 basis points to 2.48%.

All of the major U.S. stock indices were marginally in the red on Monday’s close:

Dow Jones: 17,071.22 (-41.93) -0.25%
S&P 500: 1,977.80 (-5.05) -0.25%
Nasdaq: 4,505.85 (-6.34) -0.14%

Precious metals prices at Monday’s close:

Gold: $1,215.00 (-$4.40) -0.36%
Silver: $17.46 (-$0.20) -1.13%
Platinum: $1,299.00 (+$2.00) +0.15%
Palladium: $786 (+$14.00) +1.81%

Economic News Affecting Gold

Growth in home prices for July came in below expectations, as the Case-Shiller Price Index rose 6.7% compared to predictions of 7.5%. When seasonally adjusted, U.S. home prices actually dropped 0.5% from the month previous.

Britain has also been feeling the effects of weakness in the European economy, as the Eurozone Consumer Price Index came in at just 0.3%, indicating a slowing rate of inflation. The U.K. saw just 0.9% growth in GDP in the second quarter, and housing prices fell for the first time in 17 months.

Euro stocks were up as the ECB prepares to begin quantitative easing. The euro is down 10% since May on the expectations of QE; the central bank has already cut interest rates twice in the past four months. The markets will now wait and watch to see whether the Fed or the ECB will be the first to raise rates, with gold the likely beneficiary in the meantime.

In Japan, the Nikkei 225 reached a one-week low, but remains up 4.8% in September, the best month the index has posted since last November. Elsewhere in Asia, the pro-democracy demonstrations in Hong Kong may put a damper on this week’s holidays in China, which typically boost commercial activity in Hong Kong as the rest of the country is off from work. The uncertainty surrounding the protests coincided with a 296-point drop in the Hang Seng, a loss of about -1.28%.

Geopolitical News Affecting Gold

The Hong Kong demonstrations will continue to be the biggest story in the geopolitical sphere. Although few expect China to suddenly hold fully open democratic elections in response to the protests, which are largely comprised of students, the development has the potential to adversely affect the world’s second largest economy. Beijing’s handling of the peaceful demonstrations in Hong Kong will be telling. These are the largest demonstrations in the country since the Tiananmen Square incident in 1989, an event from which the final death toll may never be known for certain.

China’s southern neighbor, Russia, is considering imposing stricter capital controls as the economy continues to tank and billions of dollars of investment leave the country. Net outflows from Russia are estimated to total $100 billion thus far this year. The ruble has remained weak, prompting the Russian Central Bank to consider market interventions to protect the worst performing currency of the third quarter.

Sales Strong From U.S. Mint

Graphic courtesy of GoldSeek

Graphic courtesy of GoldSeek

September was a robust month for sales of gold and silver bullion coins from the U.S. Mint. American Gold Eagles topped 55,000 oz for the month, the best monthly showing since January and more than double the sales in August. Meanwhile, American Silver Eagles were also snatched up by investors to the tune of 3,375,000 oz sold, the most since May. No doubt these increased sales were related to the slump in precious metals prices.

Looking Ahead

After the release of the Chicago PMI and Case-Shiller HPI stifled the markets this morning, tomorrow will see the latest PMI and ISM manufacturing indices. As far as geopolitics are concerned, despite important developments in the EU and Russia, all eyes will be trained on the outcome of this week’s student demonstrations in Hong Kong.

 

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News

Markets Down on Hong Kong Protests: Morning Market Update Sept 29

Wall St. opened sharply lower on heavy volume this morning, following European stocks downward amid concerns that pro-democracy protests in Hong Kong could turn violent. Thousands have assembled in the streets of Hong Kong since Friday, despite riot police using tear gas in an attempt to disperse the crowds.

Hong Kong is a major financial and trading hub for Asia and China, which adds to the apprehension felt by the international markets over the protests. Many trading centers and banks have closed as a safety measure.

The Hang Seng stock index in Hong Kong lost nearly 450 points Monday, dropping 1/9%. European stocks declined as well. Chinese markets are closed all week for a holiday, which will lower any Asian safe haven demand for gold.

Upward revision of second quarter GDP put a spring in Wall Street’s step after being pummeled on Thursday. The Nasdaq rose on the strength of big biotech stocks, and bargain-hunting by investors followed a drop in Treasury yields.

Gold saw short-covering early in New York, but gave up gains in late morning trading. Silver is modestly lower, while the platinum group metals are steady. The dollar has seen modest profit taking after hitting fresh six-year highs against the yen, and fresh 22-month highs against the euro. The euro has dropped below $1.27, and the yen is trading above 109 to the dollar.

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Stocks Bounce Back From Drubbing: Morning Market Update Sept 26

Wall St. opened in positive territory this morning, after experiencing the worst beat-down in months yesterday.

The dollar is reaching to regain a four-year high, and looks poised to post an 11th straight week of gains. This will be the longest rally in the dollar since it was decoupled from gold in 1971.

Gold saw support in Asia after getting a boost in New York yesterday, but reports that second quarter GDP in the U.S. was revised to +4.6% from 4.2% boosted the dollar, and depressed gold. Consumer confidence in the U.S. rose, while consumers in Germany became more gloomy.

Asian stocks closed lower overnight, catching the same cold U.S. stocks had yesterday, but European stocks rose, getting a lift from banks that will benefit from the European Central Bank’s quantitative easing program.

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Stronger Dollar Leads the Way: Morning Market Update Sept 25

With a slew of positive ecrising dollar chartonomic indicators being released this week, the dollar reached a 4-year high overnight as the DXY index broke 85. The index touched above 85.4 early in Thursday’s trading before easing back to 85.25, up 0.25%. A robust dollar is largely carrying the day in the markets, keeping both commodity prices and demand for treasury notes lower.

The euro sits at a 22-month low, as well as a 2-year low against the dollar. Meanwhile, the yen gained 0.53% vs. the dollar Thursday morning.

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Dollar Firmer on New Homes Sales: Morning Market Update September 24

home-sale-10517232_xxlData showed that new home sales in the U.S. for August spiked 18%, helping to stop the bleeding in the stock market. This also helped strengthen the dollar, which was largely unchanged after being hit by profit-taking. This surprisingly favorable housing report added some much-needed optimism to an economic landscape dominated by growing equity bubbles and signs of continued weakness abroad, particularly from the European and Asian economies.

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Airstrikes, Short-Covering Boost Gold: Morning Market Update Sept 23

In addition to the United States’ airstrikes against ISIS in Syria, the Arab monarchies (Saudi Arabia, United Arab Emirates, Qatar, Bahrain) assisted the cause by conducting airstrikes of their own. The terrorist group has previously pitted itself against the Arab establishment, claiming the destruction of the Saudi Kingdom as part of its platform.

Speaking at a global conference yesterday, King Abdullah II of Jordan pointed out that ISIS offers attractive salaries–$1,000 per month–to unemployed youth and foreign fighters. (This represents middle-class wages in Jordan, for reference.) So long as they can continue to fork over the cash, it seems ISIS will indefinitely draw recruits.

Partly on the details of the airstrikes against Syria, gold jumped over $15 up to $1,232 this morning before settling back down to $1,223.32 at the open of the New York Comex, up about $8.

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