The precious metals opened solidly in the green in early trading on Monday, pushing spot gold up to nearly $1,230/oz, already its best intraday high in ten weeks. The rally was mostly attributed to safe-haven buying and investors following technical indicators in gold’s favor. Spot silver added about 12¢ per ounce to trade near $17.70/oz.
Somewhat counterintuitively, the dollar was up on Monday even as gold and the other metals rallied. This has been the case recently, defying the traditional inverse correlation between the dollar and gold. The USD was about 0.25% higher on the DXY index this morning, surpassing 100.1. The strength of the gold price in the face of this strong-dollar environment means that the yellow metal is up even more when priced in foreign currencies.
While the dollar was firmer, stocks in the U.S. opened modestly lower. Demand for safe havens like gold and government bonds saw a surge to begin the week, as 10-year Treasury yields fell to 2.42%. The reversal of trends on the market (like the dollar and gold price not moving in opposite directions lately) seems to be a result of widespread uncertainty. According to Nigel Stephenson of Reuters, “there was no overarching theme to Monday’s market moves, highlighting how correlations between financial market assets have broken down in recent months as investors sense the era of ultra-loose monetary policy may be winding up.”
Beyond the nuts-and-bolts of monetary policy by the Fed, the policy uncertainty is also a byproduct of the new presidential administration. Although markets initially responded with exuberance to Trump’s transition into the White House, it seems traders are now unsure what means the new president will use to achieve his goals for the economy. Trump’s recent decision to enact sanctions against Iran for its missile program helped push crude oil prices higher, as well.
Stock indices in the U.S. are now stagnating after reaching new all-time highs just a few short weeks ago. European equities are also trending lower as the future of the common market looks questionable if the right-wing National Front, led by Marine Le Pen, wins the upcoming general election in France. Most shares in Europe were in negative territory, though Asian stocks rose overnight in Shanghai, Tokyo, and Hong Kong. The euro fell about 0.5% this morning to $1.07.
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