Platinum also followed its cousins lower, losing more than 0.7%. Meanwhile, palladium was flat at $800/oz.
Appetite for Risk Grows
Aside from the lack of big economic data or policy announcements, the gold market also has run out of steam for the time being due to renewed investor optimism and risk appetite. As everyone piles back into equities, safe havens like precious metals will shed their “hot money” along with traders taking short-term profits.
Accordingly, stocks were higher virtually across the board on Tuesday. Most European indices were about 0.3% higher while shares in Japan, Hong Kong, and Taiwan gained over 1%. The major U.S. indices opened the session poised to build upon Monday’s substantial gains, when the Dow Jones Industrials added over 200 points.
Wall St reacted warmly to February’s Case-Shiller Home Price Index, which showed the fastest rise in three years. It was the fourth consecutive month of all-time high home prices in the U.S. Existing home sales in March also recently came in at a 10-year high. The DJIA was up over 200 points again during the first hour of trading, while the S&P 500 climbed over 0.5%. The trickle of news regarding strong first-quarter corporate earnings have also given stocks in the U.S. a lift.
The dollar made up ground against the Japanese yen as the “fear trade” ahead of the first round of the French presidential election unwinds. The greenback once again approached ¥111, up 1% from just a week ago. However, abating worries over a possible “Frexit” referendum in France also boosted the euro, causing the dollar to trade flat on the DXY index that compares the USD to a basket of world currencies.
Trump Stays Tough on Trade
After several years of consistent strengthening in the face of the Federal Reserve signaling that interest rates will gradually rise, the dollar has hit a patch of volatility in no small part due to the cloudy forecast for U.S. foreign policy as deciphered from the words of President Trump.
In addition to commenting on cutting the corporate tax rate to a more friendly 15% to encourage businesses to repatriate large swaths of taxable earnings to the U.S., President Trump also used his platform to potentially spark a trade war with . . . Canada. The former comment—about cutting taxes—received praise on Wall St; the latter left some who were unaware of the long-standing dispute scratching their heads.
The new Secretary of Commerce, Wilbur Ross, announced that the U.S. was placing a 20% tariff on Canadian lumber imports due to Canada’s protectionist policies for this industry. The trade feud goes back many years and predates this presidential administration. Trump also suggested that the White House may seek similar actions against Canadian dairy farming. Ross commended the president for enforcing the notion that America deserves fair arrangements with all of its trading partners.
Apart from the White House’s day-to-day impact on markets, a general optimism and rise in risk appetite will continue to hurt the appeal of gold—until the next bad news report from overseas or the next disappointing economic data point.
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.