balance of gold and dollar

Resurgent Dollar Pressures Gold

January 3rd, 2017 by

Gold prices have given back modest gains this morning, as a suddenly stronger dollar is pressuring commodities. Spot gold has slipped back to unchanged, while spot silver prices have gained nearly 1% to climb back above the $16 mark. The PGMs are up sharply, with platinum up by $34 an ounce (+3.77%) and palladium up $30 (4.42%).

© Alexmillos

© Alexmillos

The DXY dollar index, which measures the greenback’s cumulative weighted performance against six major currencies* is up over 1%, from 102.8 to 103.40. Better than expected jobless numbers and inflation reports in Germany pushed the euro downward, helping the dollar gain. Inflation in Germany is estimated to have risen above the previously expected 1.4%. This compares favorably with the 1.7% inflation rate in the US. Spain saw inflation almost triple on an annual basis, rising to 1.4% from 0.5%

Rising EU inflation will satisfy one of the mandates of the European Central Bank, but apparently not enough to satisfy ECB president Mario Draghi. He recently reaffirmed that the central bank’s stimulus measures will extend to the end of 2017.

oil-rally-chartOil futures are on a rampage this morning, hitting 18-month highs as reports out of Kuwait say that the oil kingdom has already slashed production by 130,000 barrels a day. This lowers their total production to 2.75 million bbl/d. They are joined by non-OPEC oil producer Oman, who is cutting 45,000 barrels a day, to bring total production under 1 million bbl/d. At the same time, oil demand by China is seen as climbing in 2017.

West Texas Intermediate contracts for February jumped 2.5% on the news, to break the resistance level at $55 a barrel. February Brent futures saw a similar jump, leaping $1.32 from $57.05 to $58.37

Stocks opened higher and climbed this morning, in the first trading day of 2017. The Dow Jones Industrial Average is making a hard run at the mythical 20,000 mark, coming within 61 points of the goal in early trading. Banking shares are the best performers so far this morning. Goldman Sachs is more than 1.5% higher, making it the best-performing stock in the Dow.


*The euro (57.6%), Japanese yen (13.6%), British pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%), and Swiss franc (3.6%).



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