Gold prices continue to be pressured this morning, as equities continue to soar after President Trump announced he would soon unveil a “phenomenal” tax cut plan, which it is assumed will included his long-awaited corporate tax cuts. Precious metals received a reprieve at 10 am EST, however, when US consumer sentiment unexpectedly dropped from a 13-year high to a 3-month low.
Spot gold was trading modestly lower in New York before the consumer sentiment report was released this morning, after losing more than 1% yesterday to close at $1,227.80. April gold futures snapped a five-day rally Thursday, easing back from a 15-week high to settle marginally lower at $1,236.80. Spot silver lost 14 cents to close at $17.61 an ounce, while March silver futures actually posted a 0.2% gain to end at $17.74.
Platinum barely moved, losing $2 (0.20%) to hold on comfortably above the $1000 mark at $1013. April platinum futures gained $2.80 to settle at $1022. Palladium continues to sit atop the precious metals pile, ending flat at $768 on the spot market, with futures settling $2.80 higher at $772 an ounce.
The dollar was rescued from its recent struggles by Trump’s announcement yesterday, as tax cuts are expected to increase the US budget deficit, which will increase bond yields, which will stoke inflation. In other forex news, the “Trump trade” that began yesterday is fueling a risk-on appetite among investors. While the dollar extends its rally for a second day, the yen has weakened. This has helped Japanese stocks, as a lower yen assists exporters.
Stocks overseas were mostly higher, following the lead of Wall St., which hit new record highs in the euphoria following Trump’s mention of tax reform. US equities had been struggling for direction lately, believing that Trump was ignoring his promises of tax cuts and business deregulation in favor of immigration controls and protectionist trade measures. Yesterday’s White House statement sparked hope among traders that Trump’s focus will shift toward making good on his economic promises.
This morning’s risk-on sentiment has Treasury yields continuing their rise. Tax cuts combined with greater deficit spending will stoke inflationary pressures, forcing bond yields higher as more Treasuries hit the market to pay for increased government spending.
Oil prices are more that 1.6% higher this morning, extending gains for a third day. Yesterday oil futures settlements saw WTI end 1.3% higher at $53.00 a barrel, while Brent crude closed up 0.9% at $55.63 a barrel. Despite an unexpectedly large build in US crude inventories this week, traders were cheered by a surprise 900,000 barrel drop in gasoline stockpiles. This will allow refineries to process more crude oil into gas, chipping away at the US supply glut.
Oil markets were driven higher in early trading by a report from the International Energy Agency (IEA), which pegged OPEC compliance with the agreement to cut oil production at an impressive 90%. Few pundits believed that the oil cartel would stick to its guns this closely. As a result, WTI crude was trading over 1.75% higher again on Friday, looking to close the week above $54 per barrel. Meanwhile, Brent crude was trending above $56.60/bbl.
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.