Gold prices fell this morning on news that the Commerce Department’s final estimate for second quarter GDP rose from 1.1% to 1.4%. The initial estimate had been 0.8%. Gold prices dropped $6 to around $1,316 an ounce before recovering approximately $4. Stocks were up in Asia and Europe overnight, boosted by the OPEC agreement in Algiers, but US stocks opened lower as traders realized that nothing of substance came out of the meeting.
At 10am, Gold was trading at $1,318.90 an ounce. Spot gold was down $2.50 while December gold futures were $4.80 lower. Silver at 10am was trading at $19.09 an ounce. Spot silver was down 9 cents while December silver contracts were three cents lower.
Precious metal ETFs were also lower in New York. At 10am, the SPDR Gold Trust (GLD) was trading at 125.79 a share, down 0.34% from yesterday’s close. The iShares Silver Trust (SLV) was down 0.44% at $18.13 a share, while the VanEck Gold Miners ETF (GDX) was 0.56% lower, at $26.76.
The US dollar is trading slightly higher against a basket of major currencies this morning, adding a bit to yesterday’s gain of 0.2%. The Japanese yen is lower today, trading above 101.5 yen to the dollar. The yen lost safe haven appeal overnight, after OPEC’s tentative agreement on future oil production put markets in a risk-on mood. The British pound is also lower versus the dollar this morning, though the euro is slightly higher.
Wall St also got a boost from the OPEC Algiers agreement yesterday, as rising oil prices lifted energy stocks. The Dow ended the day 0.6% higher, the S&P 500 gained 0.5%, and the Nasdaq rose 0.3% higher.
Treasury yields were up slightly, as risk-on attitudes after the OPEC meeting reduced demand for bonds. The yield on the 10-year T-note gained 1 basis point (bp), while the yield on the 30-year bond gained 0.9 bp. The 2-year T-bill saw its yield rise by 0.8 bp.
That OPEC agreement announced yesterday sent oil prices soaring. West Texas Intermediate crude rose 5.3% to finally settle above $47 for the first time in almost three weeks ($47.05). Brent crude jumped nearly 6%, ending $2.72 higher at $48.69 a barrel. Nymex oil futures were also helped by the fourth surprise drawdown in US crude stocks in a row. The Energy Information Administration reported that domestic crude in storage fell by 1.9 million barrels last week. US oil stockpiles have been regularly surprising to the downside since Hurricane Hermine shut down Gulf of Mexico oil rigs in late August.
As far as the reality of yesterday’s OPEC announcement in Algiers, there is nothing set in stone. A target of 32.5-33.0 million barrels per day in aggregate production was announced, compared to current production of 33.24 million barrels a day, but there was no word on what the quota for each nation would be.
What was notable about this week’s negotiations was an increased flexibility in Saudi Arabia’s position. Previously, the kingdom had taken a hardline stance, especially against its archenemy Iran. Saudi oil minister Khalid al-Falih expressed support for those OPEC members who had seen production fall due to external forces (Iran, Libya, and Nigeria).
However, nothing of substance beyond these vague pronouncements will be agreed upon until the regularly scheduled OPEC meeting in November.
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