Precious metals are quiet this morning, as the Federal Reserve Bank’s Open Market Committee Meeting gets underway. There is little doubt that the Fed will leave the fed funds rate alone, with this morning’s CME FedWatch gauge giving a 95.2% chance of the Fed standing pat tomorrow afternoon. Recent data showing a weakening economy over the first four months of the year has stayed the Fed’s hand, but a turnaround may be in the making.
Spot gold fell nearly $12 an ounce yesterday, on reports that the Atlanta Fed GDPnow algorithm’s first forecast of second quarter growth came in at 4.3%. This followed on the heels of the government’s first estimate of actual first quarter growth was a sickly 0.7%. June gold futures also closed lower, shedding $12.80 to settle at a three-week low.
Silver prices were also hit hard, losing more than 2% to close at its lowest point since mid-January.
Political fears in the Eurozone abated Monday, contributing to the fall in gold prices. Former Italian prime minister Matteo Renzi overwhelmingly won his party’s nomination with 70% of the vote. Renzi had resigned after a campaign to modernize Italian bankruptcy laws and streamline government was shot down in a national referendum.
Europhiles are hoping that this endorsement of Renzi will give him the strength needed to successfully fight off challenges from the far-left Five Star Movement, which has ridden populist anti-austerity sentiment to several important victories.
Also on the European election front, centrist French presidential candidate Emmanuel Macron holds a healthy lead over far-right candidate Marine Le Pen, 59% to 41%. This however, does not show the large percentage of left-leaning voters who plan to stay home, rather than choose between the pro-business candidate, and the anti-immigrant Islamophobe one.
Le Pen’s effort to entice more mainstream conservatives may have hit a snag, as the press reports that she plagiarized large portions of a speech she gave yesterday from a speech given by center-right candidate Francois Fillon during the primaries.
Stocks opened higher this morning, with the Nasdaq Composite building on yesterday’s all-time high. President Trump’s interview with Bloomberg yesterday slammed the stocks of Too Big To Fail banks, when he said that he was looking to revive the Glass-Steagall Act, which made big banks keep their normal loans and deposits business separate from their investment banking trades. Financial sector stocks recovered before the final bell, but the Dow was the only major index to close in the red yesterday.
Oil prices continue to slide, amid a growing consensus that OPEC cannot cut production faster than US shale drillers can increase production, maintaining a global oil glut. June West Texas Intermediate crude oil contracts settled at a five-week low Monday, at $48.84 a barrel. July Brent contracts also fell 1% yesterday, to $51.52. Falling oil prices have been a major factor in suppressing inflation around the world.
Prices on US Treasuries were hit yesterday, when Treasury Secretary Stephen Mnuchin told reporters that the government was considering following the lead of European governments in issuing “ultra long” bonds — bonds with maturities longer than 30 years. This news sent yields shooting higher, with the sell-off continuing this morning.
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