Emboldened by a string of strong economic data being reported in the U.S., bearish bets on the gold market have been on the rise. Ignoring for a moment that these upbeat reports don’t necessarily negate economic warning signs elsewhere nor alter the safe haven argument for gold, renewed belief in the American economy is dragging precious metal prices slightly lower.
Spot gold opened about 0.1% lower before peaking just above unchanged at $1,275/oz, showing that the yellow metal is still resilient in the face of encouraging data that has emboldened gold bears. Meanwhile, silver prices actually traded 8¢ higher (+0.45%) per ounce to $17.80/oz.
Following the third-quarter GDP estimate that came in solidly above expectations at 2.9%, the U.S. economy got more encouraging news on Monday. The Department of Commerce announced that September saw a rebound in consumer spending, which ticked up to 0.5% during the month after actually falling 0.1% in August.
Not only does consumer spending make up a sizeable portion of U.S. economic output, but it also is tied to a healthy rate of inflation. Price inflation is one of the key metrics the Federal Reserve has been targeting before it chooses to raise interest rates, so the biggest jump in the personal consumption expenditures (PCE) index in nearly two years is taken as a move in the right direction. The PCE index gained 1.7% year-on-year in September.
While spending on services rose 0.3% over this period, there was a more noteworthy 1.3% spike in purchases of long-term manufactured goods.
Amid the improving perception of the U.S. economy, the dollar was firmer. The greenback traded at 98.6 on the DXY spot index, not far from a recent 8-and-½-month high. After reaching as high as 1.85% last week, the yield on the 10-year Treasury was marginally lower on Monday at 1.83%.
Friday’s employment report will be eagerly awaited by traders, as will the Bank of England’s policy meeting this week. The key economic data being released on Monday are personal income and outlays, the Chicago ISM business survey, and the Texas manufacturing outlook survey.
Oil, Stocks Trend Lower
Crude oil prices fell at Monday’s open with no apparent agreement between OPEC members still making any production cuts unlikely. Both WTI crude and Brent crude lost almost 2% by about 10 am EST in New York. The two benchmarks traded below $48 per barrel and $49 per barrel, respectively.
Even as Wall St has been buoyed by largely better-than-expected corporate earnings during the third quarter, the stock markets have responded poorly to the weakness in crude oil. U.S. equities opened slightly in the green but were trending downward in early trading. Equities were higher in Australia and Brazil, but much of the Asian markets closed in negative territory. European stocks also opened in the red on Monday morning.
The gold market may continue to get a boost until Election Day as the FBI announced it is re-opening its investigation into Democratic candidate Hillary Clinton’s use of a private email server while secretary of state.
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