Hammered Dollar Helps Gold

August 16th, 2016 by

Gold prices rose modestly overnight, gaining $10 an ounce after the US dollar fell to a seven-week low. The struggling greenback also helped Nymex gold futures hit a four-week high.

Profit taking struck gold prices at the New York open, pulling prices down from nearly $1359 to the $1342 level. Silver prices, as usual, followed gold’s trajectory.

global-markets-downStocks opened lower on Wall St, as traders recoiled from New York Federal Reserve president William Dudley’s statement that a rate hike in five weeks is still possible, proving that FedSpeak can still counteract actual economic data. But on the other side of the coin, San Francisco Federal Reserve president John Williams came out yesterday with a statement that the Fed should “move the goalposts” for raising benchmark interest rates by lifting the inflation threshold above the present 2%.

Spot gold added $2.90 yesterday, to close at $1338.60. December gold futures settled at $1347.50 an ounce, gaining $4.30 for the day. Gold contracts, which settle at 2pm Eastern, have lately been taking advantage of recent midday highs in gold prices to settle above the spot close. $1350 remains solid resistance for gold. A convincing close above that level is needed to break recent range-bound trading.

Spot silver gained a dime to close at $19.74 an ounce. September silver futures grabbed 14 cents to settle at $1985 an ounce.

Stocks were moderately higher on light volume Monday. All three major indices closed at new records. This is only the second time that all three indices have closed at record highs on the same day since 1999. (the first time was last Thursday). Stock prices are being supported by investors’ chase for yield, as bond yields remain at historic lows.

Speaking of bonds, Treasuries prices slipped yesterday, as more money is rotated into equities. The yield on the 10-year Treasury note gained 3.9 basis points to settle at 1.554%. Bonds, like gold, have been trading in a tight range.

oil marketOil prices finished higher on Monday, as traders clung to the fantasy of an agreement among OPEC producers and Russia to limit production and support prices. (There has never been such an accord where no one cheated.) Even so, West Texas Intermediate closed on the Nymex exchange with a 2.8% gain, at $45.74 a barrel.  Brent crude futures gained 2.7% to close at $48.35 a barrel. This is the highest close for either contract since mid July.

Lower oil prices last month helped keep consumer prices flat. A stronger dollar helped keep import prices low. Housing starts for July were reported this morning to have risen more than expected. This holds out hope for improved employment levels and a recovering economy.

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product