falling-dollar

Gold Price Rises on Weak Dollar

May 22nd, 2017 by

The precious metals opened slightly higher on Monday morning thanks in no small part to a softer U.S. dollar. Spot gold was up modestly in early trading to $1,258/oz while silver prices gained 1% to cross back above the $17/oz threshold. Platinum prices were flat at about $940/oz but palladium bucked the trend, tumbling about 1% to $750/oz, its lowest in nearly four months.

Dollar Takes a Dive

falling-dollar

The greenback has been stuck in a continuous downturn over the past two weeks, ceding considerable ground to virtually all of its major peer currencies, namely the euro, the Japanese yen, and the British pound. As measured by the DXY index, the USD traded at a six-month low of 96.9 on Monday, 0.25% lower.

Naturally, the weaker dollar has coincided with higher energy prices. The crude oil market is trading at a one-month high, with both WTI crude and Brent crude advancing about 0.8% this morning. WTI traded above $50 per barrel while Brent was above $54/bbl. Stocks in the U.S. and abroad were mostly higher to begin the week, while demand for bonds remained strong. The 10-year Treasury yield sat at just 2.25%.

Global markets are watching with interest as President Trump moves on to the second leg of his long international voyage by giving a speech in Tel Aviv, Israel. On his first stop traveling around the Middle East, Trump played to the audience in Saudi Arabia, spending much of his speech before Saudi royalty attacking their arch-rival Iran as the world’s largest state sponsor of terrorism. The president made a clear effort to strike a more nuanced tone on Islam than he had up until now, emphasizing that any violence in the name of religion ought to be condemned and defeated.

In what can hardly be considered an unrelated development, shares of arms and defense manufacturers like Lockheed Martin were higher on the $100-billion deal reached between the U.S. and the Saudis. In exchange for weapons, Saudi Arabia will make aggressive new investments in the U.S. economy, reinforcing the largely transactional alliance between the two countries.

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In other market news, it appears that the democratizing influence of the internet and the Information Age are beginning to level the playing field in commodities trading. With an abundance of relevant information now at the fingertips of anyone with an internet connection, the insiders are seeing their advantage in knowledge shrink relative to the everyday investor. Of course, faster trading platforms such as high-frequency trading (HFT) still give professional trading firms a distinct advantage in executing their trades, but the availability of information about the markets is nonetheless empowering their smaller competitors. As a result, easy arbitrage opportunities are becoming more scarce, forcing commodity traders to take a more holistic approach.

A steady stream of economic data is set to be released this week. This morning, the ISM business and economic forecasts come out along with the Chicago Fed national activity index. On Wednesday, the FOMC will release the meeting minutes from its most recent gathering. OPEC begins its meeting in Vienna on Thursday. Additionally, the president’s budget for Fiscal Year 2018 is expected to be finalized within the next week or so.

 

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.