Lots of bullish news for gold this morning, as the yellow metal is set to post its third straight week of gains.
Firstly, China caught everyone by surprise by announcing cuts in benchmark interest rates, and promising to inject liquidity into the market to alleviate a credit crunch.
This was followed by European Central Bank president Mario Draghi vowing the the ECB would move quickly to reverse deflation in the EU, and would use Fed-style outright bond purchases of sovereign debt if necessary.
These moves sent global stocks, commodities, gold, and the U.S. dollar all higher.
However, the most shocking news in the gold markets was the revelation by the Dutch National Bank that the Netherlands secretly repatriated 122.5 metric tonnes of gold from the U.S. This accounts for a full 20% of Dutch gold reserves, and brings the amount stored in New York from 51% to 31%. Major Dutch newspaper De Telegraaf quoted a DNB official as saying: “It is no longer wise to keep half of our gold in one part of the world. Maybe that was desirable during the Cold War, not now.”
This news has the Germans wondering why the Bundesbank has failed to repatriate German gold from the U.S. After being convinced to not demand immediate delivery of 300 metric tonnes of gold from the New York Federal Reserve Bank, Berlin agreed to spread the repatriation out over eight years. But, instead of the 37 tonnes they were promised last year by the U.S., they only received 5 tonnes of gold Read this report by Dutch gold expert Koos Jansen for all the details.
Despite the stronger dollar and rallying stock markets this morning, spot gold is up over $9 to break the $1200 mark again. Silver is up 1.5%, and the PGMs are both up around 2%.
Spot gold regained most of Wednesday’s loss overnight, and is bouncing in a $5 range in New York in reaction to various economic reports. Physical buying in Asia increased after spot gold posted a $14.40 loss that brought it back to the $1,186 support level.
Silver is back to painting an almost identical chart over the last three days, after yesterday’s move by one or more large players used poll results on the Swiss gold referendum to flush both gold and silver stops out on the downside and the upside.
Platinum erased all of yesterday’s losses overnight, while palladium has gained slightly on yesterday’s close.
The dollar is seeing its highest volatility in 9 months, jerking above and below unchanged after bleeding off overnight gains in late London trading. Wall St. opened lower on disappointing economic growth reports out of the EU and China. This news also has European stocks trading lower. Crude has reversed yesterday’s losses, trading up nearly $1.00.
Gold made a stab above $1,200 in late trading in London for the second straight day as the yellow metal is primed to again test this resistance level. After gold recently broke through resistance at $1,186.70, this price became the support level at the 50% Fibonacci retracement. Meanwhile, the 38.2% Fibonacci retracement is now at $1,235.30.
The glow of recently announced mergers and acquisitions outweighed fears of an impending recession in Japan as the Dow Jones hit another record high on Tuesday and the S&P 500 followed suit on the strength of healthcare stocks. There have been $1.5 trillion in mergers this year involving U.S. companies, the most in nearly 15 years. Stocks opened modestly in the red on Wednesday, as did the precious metals, ahead of Wednesday afternoon’s release of the FOMC meeting minutes.
A big surprise in German economic outlook boosted the euro today, which softened the dollar and added fuel to a short squeeze in gold.
Spot gold broke above the psychologically-significant $1,200 mark in early trading before profit-taking set in in New York. Gold had started a new rally even before the ZEW economic sentiment survey was released. Physical buying in Asia is reported to be picking up as gold prices seemed to be holding the rebound from recent lows. Sales out of the Shanghai Gold Exchange were already 90% of last November’s level on Monday. Gold Forward rates are still at their lowest in 14 years, but are attempting a halt to their slide.
Deeply negative GOFO rates as we are seeing now is an indicator of a shortage of leaseable COMEX and London physical gold. The huge physical outflows from the West to Asia since 2013 after the big drop in prices is reducing the amount of gold in the West. The situation is being exacerbated by economic sanctions against Russia for their seizure of Crimea. Mining companies in Russia are unable to export their gold to the West, so the Russian central bank is buying it up to keep them in business.
While this Russian gold may come back into the market in the future, it is doubtful that any of the gold sold to Asia will be seen in Good Delivery trading warehouses again.
Silver is up-and-down above unchanged, after gaining modestly in Europe. Platinum gave up an almost $15 gain in Europe to trade slightly above unchanged in New York, while palladium has been patiently since the Asian open.
Third quarter GDP in Japan caught traders by surprise, dropping at a -1.6% annualized rate to put the nation into recession. Analysts had expected a 2.2% increase after the second quarter’s huge -7.3% reading.
The Nikkei stock index in Tokyo dropped over 500 points, nearly 3%. Crude oil prices were lower, anticipating reduced demand from the world’s third-largest economy.
Also in Asia, the economic slowdown in China (which recently took the crown of “world’s largest economy” away from the United States) has caused the largest surge in bad loans since 2005. Even though the Shanghai Stock Exchange saw a flood of Western money on the first day foreigners were allowed to buy mainland stocks, both the Shanghai and Hong Kong exchanges finished in the red.
The dollar recovered to the upside in afternoon trading in Europe, both on the news about Japan, and the Bank of England’s warning over falling inflation in the UK, and worries of deflation caused by the slowdown in the EU economy. The pound dropped again for the fourth day against the dollar.
Gold and silver are trending slightly under Friday’s close, holding on to most of Friday’s big gains. Platinum is slightly lower. Palladium, which was the only precious metal to close lower on Friday, is up slightly.
The dollar is stronger this morning as it continues to beat the stuffing out of most other currencies around the globe. The euro, yen, and pound sterling were all lower against the greenback, with the pound falling to a 14-month low. This has been attributed to falling home prices in England and apprehension that the deflation contagion from the EU may engulf the British isles, as well.
Wall Street opened lower this morning following a bouncy day for stocks that saw the Dow Jones reach a new high while the Nasdaq and S&P 500 were essentially flat. The dollar is easing slightly while the yield on 10-year Treasuries dropped 4 basis points to 2.34%. Precious metals were not the beneficiary, however, as gold and silver were largely unchanged with platinum and palladium taking a slightly steeper hit.
First-time jobless claims rose by 12,000 last week, coming in at 290,000 new jobless benefits applications. Expectations were for 280,000 new claims, but the slight miss did little to move the markets this morning. Moreover, the Labor Department cited no particular reason for the increase, as this is now the ninth consecutive week with less than 300,000 new jobless claims. Many analysts take this as a sign that unemployment is at least stable and the labor market may be shoring up, as U.S. companies are currently hiring at their fastest pace in 7 years.
This had little effect on trading, although all three U.S. stock indices oddly plummeted in unison this morning after opening about 0.5% in the green, falling all the way to unchanged before bouncing back positive.
With the dollar finally easing from its recent highs, the precious metals have been able to keep hold of the gains they have made this week. Volatility is still fairly high as the markets sort out where the sputtering global recovery is headed.
Wall Street opened in the red this morning on concerns over the health of the Eurozone economy remains in doubt. Euro banking stocks were also pulling down the European indices following the revelation that five banks have agreed to pay fines totaling $3.3 billion to regulators in the U.S. and U.K. in connection their role in manipulating the currency markets. In addition to rigging Forex trades, Switzerland’s largest bank, UBS, has also admitted to misconduct in the precious metals market.