Precious metals are lower this morning, despite the European Central Bank and the Bank of Japan both keeping interest rates in negative territory, and showing no signs of tapering their stimulus measures. Major bearish factors today are a sudden jump in the dollar, as well as stock markets opening higher after yesterday’s skittishness over reports that Trump will pull the US out of NAFTA.
Spot gold is trading seven dollars lower this morning, at $1,262 an ounce. Gold is totally ignoring all bullish data being reported today, and setting up for a fourth day of losses. Spot silver is 22 cents lower, after dropping nine cents on Wednesday. Platinum is look at a third day of losses, trading nine dollars lower, after losing four dollars yesterday.
The outlier this morning is palladium, which is holding on to yesterday’s $10 gains. On the paper market, palladium futures are up nearly 19% year to date, by far the best performing major commodity.
Speaking of the futures market, yesterday’s action saw June gold lose three dollars an ounce to settle at $1,264.20, a 2-1/2 week low. May silver futures lost 23 cents, while July platinum contacts ended 0.8% lower. Echoing the spot market, June palladium futures rose 1.1% to close above the $800 mark once more, settling at $805.
The Bank of Japan this morning kept its benchmark interest rate at -1%, while expressing optimism that its four-year old stimulus program is beginning to work. In contrast, it lowered its near-term inflation forecast, while continuing to maintain that it believes inflation will hit its 2% target by the end of fiscal year 2019.
On the other side of the world, the European Central Bank was singing much the same tune. ECB president Mario Draghi called the economic recovery in the EU “solid and broad“, but inflation growth was still disappointing. Much like the Bank of Japan, the ECB assured markets that any easing of negative interest rates or reduction in its stimulus program would not happen in the near future.
Pending sales of existing homes in the US dropped in March, sending the National Association of Realtors pending sales index to a negative 0.8, compared to a positive 5.5 in February. The numbers were in line with expectations, as the inventory of existing homes on the market continues to tighten.
Also in the negative column was first-time jobless claims. Initial unemployment claims rose by 14,000 applications last week, to a four-week high of 257,000. Economists were expecting a much more gentle rise of 2,000.
Durable goods orders in March rose, but not as fast as analysts were hoping for. Some are taking this as a sign that the recent rises in manufacturing are beginning to run out of steam.
President Trump’s one-page tax plan revealed yesterday did not receive quite the reception the White House hoped for. Ballyhooed as the largest tax cuts in US history, Wall St didn’t seen anything much more than what has been expected since last November as all three major indices ended the day flat.
On the political side, Tea Party Republicans are balking at the hugely higher deficits Trump’s tax cuts will create. The House Conservative Caucus is certain to take Trump to task over his tax plan, much as they did his plans for Obamacare that did not go far enough to repeal the Act.
Forex traders weren’t bowled over by the tax plan, engaging in a little “buy the rumor, sell the fact” action yesterday. Today’s central bank announcements are naturally affecting their respective currencies. The euro came down off recent highs hit after the centrist candidate Emmanuel Macron won the first round of the French presidential election. The British pound hit fresh 2017 highs against the dollar this morning, but some traders are eyeing a possible consolidation in the near term. Others believe the sterling’s three-day rally is only the beginning, calling the pound is “still very cheap”.
The dollar actually got a boost in early New York trading, pulling the greenback above the 99 mark on the DXY dollar index.
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