Gold prices are aiming for their best week in two months, after huge Fed-induced gains on Wednesday. Gold was able to notch small gains yesterday to keep this week’s rally alive, closing at a two-week high. Spot silver broke above the $20 barrier yesterday, but was unable to seal the deal.
Precious metals ETFs also gained. The SPDR Gold Trust (GLD) rose 0.4%, while the iShares Silver Trust (SLV) ended 0.6% higher. Miners didn’t come along for the ride yesterday, as the VanEck Vectors Gold Miners ETF (GDX) ended the day practically unchanged.
Hawkish statements by Boston Federal Reserve president Eric Rosengren this morning led the dollar to pop and gold to drop a little, but bullion quickly shook off the effects of the higher dollar. Rosengren until now had been a noted dove on the Federal Reserve board, but his recent hawkish statements are unsettling markets. For only the fourth time since 1992, three Fed officials dissented with the FOMC policy statement. Kansas City Fed president Esther George, who has dissented in favor of rate hikes three time prior, joined Rosengren and Cleveland Fed president Loretta Mester in disagreeing with the majority decision to keep interest rates where they were.
On Wall St, stocks opened lower this morning, retreating from recent solid, Fed-fueled gains. Downward pressure increased when the Markit flash manufacturing PMI for September was reported to have dropped to a three-month low. The reading of 51.4 follows a 52 score for August, caused mainly by a slowdown in new orders.
On Thursday, the Nasdaq hit a record high for the second day in a row, as tech stocks led a rally given new life from the Fed’s inaction. The US dollar (DXY) fell for the second day Thursday, also driven by the Fed’s refusal to raise benchmark interest rates. The dollar is slightly positive this morning, as the boost from Rosengren’s hawkish statements is being deflated on the disappointing PMI report. A slowdown in manufacturing could give the Fed reason to delay a rate hike again at their next meeting.
Bonds were bid yesterday, with the yields on 2-year, 10-year, and 30-year Treasuries all falling on increased demand. The yield on the 10-year note fell to a two-week low. The action in bonds reflected relief that the Fed did not increase interest rates on Wednesday, even though December is looking like a rate hike slam dunk. The CME Group FedWatch tool, which tracks Fed funds futures to gauge market sentiment, is giving a 55.3% chance for a December rate hike this morning.
Nymex oil futures are flirting with the possibility of ending a four-session win streak this morning, as market chatter ahead of next week’s industry forum in Algiers grows closer. Libya and Nigeria have brought more production online, and Russia is pushing its production ever-higher, adding another 800,000 barrels of crude to the global oil glut every day. This is putting paid to recent estimates that global demand would soon start catching up to supply.Monday marks the beginning of the three-day International Energy Forum conference in Algiers. OPEC has said that it will use the occasion to meet on the sidelines and discuss a freeze in oil production. Saudi Arabia and Russia have been gaming the press leading up to the conference, and the oil market is hoping and praying for a breakthrough in negotiations.
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