Gold is flat-out ignoring a stronger dollar this morning, as investors and banks continue to scramble for a safe haven after the Swiss National Bank abruptly cut the peg of the franc to the euro. Spot gold is up to over $1,270/oz after holding on to yesterday’s massive gains overnight in Asia and Europe.
The reverberations of this surprise move by the Swiss central bank is still being felt world-wide. The currency markets were caught flat-footed, complacent in the “surefire” bet on the Swiss franc. None of them expected that when the bell tolled, it would be a cookoo clock.
European stock markets are notching gains, as the de-coupling of the CHF from the Euro is considered a signal that the Swiss know that the European Central Bank is about to start printing money. Wall St. is attempting to break a five-day losing streak, but is being hampered by lackluster economic news.
Spot gold is at new four-month highs this morning, hitting $1,276/oz at 10am.
Yesterday in the Markets
Yesterday was all about the Swiss Franc, as equities, bonds and precious metals were all in a tempest over the news. A surprise jump in first-time jobless claims in the US only added another boot on top of the head of the stock market, forcing it down.
Factors Affecting Gold Today
Safe havens are shrinking for investors looking to flee turmoil in Europe, as as the demand for government bonds sends yields to zero or below. Spooked by the “sure bet” of the safety of the Swiss Franc being yanked from under their feet, some investors may be looking askance at the dollar and yen, preferring to hold gold. US Treasuries are down after the panic inflows of yesterday, but the yield on the 10-year note is still only 1.75%. That’s still over triple what the German 10-year bund is paying.
The consumer price index in December saw its largest drop in six years, posting -0.4%. This is on top of a -0.3% in November, as plummeting gas prices snuffs inflationary pressures. Core consumer inflation was flat, only the second time since 2010 it has not risen on a monthly basis.
Crude oil is seeing gains for a second day, with the spread between Brent and West Texas Intermediate (WTI) widening to $2.50. Brent futures were up over 1% this morning to pull prices above the $49 mark, while WTI rose only half that.
US markets are closed Monday for Martin Luther King Jr Day, so expect volumes to be very shallow to start the week. No big economic news is expected over the weekend, and the latest Chinese data will not be released until 9pm Eastern Time on Monday.
Have a happy and safe weekend, and if you’re escaping the snow by vacationing in the Tampa Bay, Florida area, drop by our lovely showroom just north of Tampa on US 41.