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Gold Slightly Higher After U.K. Attack

May 23rd, 2017 by

Global markets were a bit shaky on Tuesday after a concert in Manchester, U.K. by pop star Ariana Grande was marred by an ISIS bombing that killed at least 22 people, including children, last night. The so-called Islamic State took credit for the horrific attack.

Undoubtedly, everyday life in the U.K. was disrupted as the lost innocent lives are being mourned. The best hope is for a return to some semblance of normalcy.

With safe-haven fears of course cropping up in the wake of the bombing, gold prices rose about 0.2% higher to $1,262/oz in early trading this morning. Spot silver gained 13¢ per ounce to trade at $17.27/oz. Both platinum and palladium were about 0.75% higher.

European Markets Provide Normalcy

One of the important lessons from the string of terror attacks that have become regular occurrences after 9/11 is that perhaps the best thing we can do is not let it impede normal business and the other important things in society for too long. After grieving, the attacked country—and the world—must carry on. This starves the terrorists of what they really hope to accomplish: instilling fear and fomenting unrest.

sterling

In this vein, British Prime Minister Theresa May had other serious matters to focus on aside from helping her country heal from the heinous attack. Namely, she was already busy navigating the Brexit negotiations between the U.K. and EU. The latter has finalized its bargaining position, which reportedly imposes a huge severance payment on the British for leaving the union. Brussels is insisting that all sorts of collective funding commitments and loan obligations by the U.K. must be settled as part of the divorce. May, perhaps pressured on the right from hard-line Brexiters, is unlikely to be pleased with the terms of the split, and rumors have swirled that she may walk away from the negotiations altogether.

The pound fell due to the Brexit tension heating up, and the terror attack that May called an example of “sickening cowardice” likely didn’t help the sterling, either. However, data showing strong economic growth for Germany—and thus a good sign for Europe as a whole—helped lift the euro firmly above $1.12. This was also partly due to German Chancellor Angela Merkel commenting yesterday that the euro was too weak.

factory

Aside from everything else, the bump in gold prices was due in part to the latest Flash PMI readings in the U.S. that showed stronger expectations in the services sector at the same time that the manufacturing PMI plunged to an eight-month low. This gives some indication of where recent job growth is coming: less so at factories, more so at Mickey D’s. The dollar was largely flat while Treasurys saw a slight uptick in demand, pushing 10-year yields down to 2.24%.

Oil prices dropped on Tuesday following a four-day streak of gains. OPEC begins its meeting in Austria on Thursday, so prices are likely to pause until after some details of the gathering leak to the media.

There’s quite of a bit activity for leaders of central banks this week. The Bank of Japan’s Governor Kuroda and the European Central Bank’s President Draghi will both be giving major policy speeches this week. FOMC meeting minutes for this month will be released, which always garners attention. In addition, the Bank of Canada will announce whether or not it will move interest rates.

 

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.