A weaker U.S. dollar and positive momentum from futures traders are driving the precious metal prices higher on Wednesday morning. Spot gold climbed from $1,260/oz overnight to as high as $1,268/oz by 10:15 am EST. Both platinum (+0.5%) and palladium (+1.5%) were higher, yet spot silver was actually down 0.35% to $17.30/oz.
Over the past few weeks, the dollar has lost ground against its major peer currencies around the world, especially its two biggest counterparts: the Japanese yen and the euro. The yen is at a six-week high of ¥110 per USD, while the euro has remained around $1.12 all week, its highest level since last November. The Chinese yuan has actually seen its strongest rally in four months amid speculation that China’s central bank is aggressively intervening in the market to punish bears and short-sellers.
Accordingly, the greenback was down another 0.2% on the DXY index this morning, registering at 97.1, which is just off of its lowest point since the presidential election. There is some feeling among investors, both in the U.S. and abroad, that the recent international trip by President Trump and several of his key administration officials (notably Secretary of State Rex Tillerson) was not as well-received in Europe as it was in the Middle East. Trump has remained true to form by criticizing and antagonizing America’s allies in the region, from snubbing German Chancellor Angela Merkel during her White House visit to consistently calling on NATO members to pay their share of the costs for the military alliance.
How all of this affects the standing of U.S. investments around the world is still not entirely clear, but the early indications have not been encouraging. U.S. bond yields were down slightly again on Wednesday, as the 10-year T-note yield fell to 2.21%. The stock markets were mixed but mostly in positive territory during early trading.
One bit of good news was that home prices in the U.S. hit a 33-month high last month. Oil prices continued their downward tumble, as WTI crude and Brent crude were each 3% in the red this morning. Wednesday also marked the last trading day of the month, so a degree of volatility as options expire would not be surprising.
In the U.K., the revelation that professional pollsters have grossly misjudged another election—this time, overestimating the amount of support for the Tories in the upcoming national elections—has upended normal market activity in the country. Traders have no clear idea of where the election will go, which would have major implications for Britain’s economic policy, especially with regard to Brexit. The latest election forecasts leave a wide array of possible scenarios in play, from a comfortable ruling majority for the Conservatives to the party potentially losing power in Parliament altogether. The pound sterling responded negatively to the sudden uncertainty, slumping to a five-week low overnight amid otherwise volatile action.
While it does seem that every election is becoming more difficult to predict, and the stakes are always particularly high, gold has only benefited marginally from the political anxieties that seem to be consuming much of the world. As we head into the summer months, the attention of the markets is likely to turn toward the Federal Reserve and whether or not it follows through on more interest-rate hikes this year.
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.