Precious metals are trending higher this morning, with gold prices rallying for the fourth day on a weaker dollar and risk-off sentiment on the global stage.
Soft economic news in the US has the dollar weaker for another day, with some analysts predicting that the greenback’s rally is done for now. A softer dollar boosts the price of gold, oil and other commodities that are priced in dollars.
Gold closed near a two-week high yesterday, on safe haven demand and a weaker dollar. Platinum gained $11 an ounce yesterday, and has already matched those gains in early morning trading.
MarketWatch reports that platinum, silver, and copper all rallied on fresh news that the Chinese goverment will once again go on an infrastructure building spree. The odd man out in this precious metals rally is palladium, which has been falling on concerns of an inventory glut of both new and used vehicles.
Stocks are continuing to rally this morning, even as bonds and gold are being bid up, as investors weigh recent developments against their appetite for risk.
There are three main events on the geopolitical scene that are rattling markets: North Korea’s latest missile test was focused on testing their design under re-entry conditions that would be seen by an intermediate range nuclear ballistic missile; fears the global ransomware threat from variants of the WannaCry computer worm are just starting; and the new that President Trump revealed top secret information with the Russian Foreign Minister and Russian Ambassador to the US in a private meeting in the White House.
The DXY dollar index is falling for the fifth day in a row on news about Trump’s security breach to the Russians. The weaker dollar has sparked a chain reaction throughout the markets. A lower dollar equates to higher oil prices. Higher oil prices boost the profitability of energy companies like ExxonMobil and Chevron. This rally in the energy sector sends stock indices higher.
Oil prices got an even larger boost yesterday with the news that Saudi Arabia and Russia were crafting an agreement to extend oil production cuts that began in January. The new plan is to keep production down through next March. The fly in the ointment of this plan is the ever-increasing crude production in US shale fields.
West Texas Intermediate futures have risen 13% in seven sessions after Monday’s settlement. Yesterday saw US crude gain 2.1% in light volume, to end at $48.85 a barrel. Brent contracts rose 1.9% to get the global benchmark over the $51 mark, settling at $51.82.
Action in the Treasuries market was subdued Monday, after Friday’s big gains. A weaker retail inflation report dampened expectations of a Fed interest rate hike next month, prompting buying in the bond market. However, the latest “Russiagate” developments have investors retreating into Treasuries again this morning.
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