Gold prices are down sharply to begin the week, losing more than 1% after a referendum vote in Italy and presidential elections in Austria failed to depress stocks. A weaker dollar has not been enough to staunch the bleeding in the bullion market, though oil prices rose another 1% in early trading on OPEC euphoria.
ISM Index Jumps
Spot gold is trading under $1,160 an ounce, hitting a fresh downdraft after the ISM non-manufacturing index saw its biggest one-month jump in 13 months. The index, which tracks services, construction, mining, agriculture, forestry, and fishing and hunting companies, came in far above economists’ expectations. November’s ISM index came in at 57.2, from 54.8 in October. The median estimate was for an increase to 55.5. Any reading above 50 indicates expansion. Spot silver is trading more than 1% lower, following gold downward.
Democracy in Europe
While the Italian referendum to reduce a bloated central government and improve government efficiency was widely expected to fail, Sunday’s presidential election in Austria was far from certain. European markets breathed a sigh of relief after voters rejected the candidate of the far-right Freedom Party in favor of the center-left coalition candidate. This pulled the euro up from a 20-month low around 1.05 to jump to over 1.07 versus the dollar.
Good economic news also helped European stocks shake off any lingering worries regarding what the Italian vote meant for the EU as a whole. Retail sales in October across the Eurozone grew by 1.1% after a -0.4% reading in September. Year-over-year, sales activity grew by 2.4%.
Oil Rises Again
Oil prices are higher for the third straight session after OPEC unexpectedly came together to forge a deal to reduce production. The rally saw Brent crude futures top $55 a barrel for the first time in 16 months. Since last week’s OPEC announcement, crude oil prices have rallied 18% higher.
Today’s general risk-on sentiment across sectors is also weighing on bond prices, as the yield on both the US and German 10-year notes fell 6 basis points and 2 bp, respectively.
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