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Gold Starts December at 10-Month Low

December 1st, 2016 by

Gold prices sank to a 10-month low overnight, as risk assets gained on news of a deal by OPEC members to cut total oil production. If the major oil producers can actual adhere to the deal, it will contribute to the rise in inflation that central banks desperately desire.

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Spot gold is down nearly 1% this morning for a $26 drop since yesterday afternoon. Gold futures are also lower, after shedding 1.4% Wednesday to settle at $1,173.90. These losses ended a sour month for COMEX gold, which recorded a steep 7.9% drop in November.

Silver futures and spot silver both ended the month at $16.48 an ounce, just under the $16.51 level that signifies a bear market from the August 2 high of $20.63. COMEX silver prices ended the month 7.6% lower.

Yen and Bonds Fall, Crude Oil Rallies

Precious metals prices aren’t as low as they could be this morning. as the dollar gives back some of yesterday’s gains. The greenback crushed the yen lower yesterday, while also weighing on the euro. The dollar’s strength while oil prices catapulted higher yesterday is a testament to traders’ belief that higher oil prices will only add to inflation pressures already being felt in anticipation of Donald Trump’s proposed spending plans.

Those oil prices are still rallying, up nearly 3% this morning after jumping more than 9% on news of the OPEC production cut deal.  January West Texas Intermediate contracts settled $4.21 higher at $49.44 a barrel. This was a gain of 9.3%, which turned oil prices around to record a 5.5% gain for the month. January Brent futures contracts were up another 3.5% on Thursday morning to $53.72 per barrel.

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Bonds have meanwhile been getting crushed. It was, in fact, the worst performance in a single month for the global bond market ever. (Records were first kept beginning in 1990.) According to an index of government bonds around the world, a staggering $1.7 trillion was wiped out from the bond market in November. The 10-year Treasury note yield hit a fresh high at 2.45% this morning after rising six basis points. This is not far from the 52-week high above 2.46% and could well signal the end of a three-decade bull market for bonds.

The drag on safer assets has also been felt by the precious metals. Investors have shunned safe havens, instead pouring $635 billion into the world’s equity markets (in terms of rising market cap) over the last month. Gold has continued to trade above the $1,170/oz mark, but some are predicting that the yellow metal could fall as far as $1,000 per ounce if support does not hold.

 

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