On Wednesday morning, spot gold recovered from negative territory, poking its nose back above $1,242.50 per ounce to trade near a three-week high. The persistent slump for the U.S. dollar has no doubt helped the precious metals, but it’s also providing some support for higher stock prices given the benefit a weaker currency poses for exporters. Spot silver similarly gained less than 0.1% on Wednesday as it approached $16.30/oz, while platinum and palladium were more quiet in early trading.
Earnings Season Continues
As corporate earnings continue to roll off the news wire, traders and investors have once again focused their attention on the equities market. Stocks in the U.S. opened higher on Wednesday after struggling to find a solid trend trend direction earlier this week. Some companies (like video streaming behemoth Netflix) are seeing a huge boon from the focus on Wall Street’s second-quarter earnings, while investors are punishing firms (like fast-casual restaurant Chipotle) that had a challenging quarter financially.
The dollar, however, has remained in a prolonged slump in part because of the shifting nature of America’s trade relations with its global partners. The DXY index that measures the dollar against a basket of its peers was mostly unchanged this morning at 94.75, but remains just barely off of its lowest level in 10 months. The euro retreated from nearly a two-yer high above $1.15 as the European Central Bank (ECB) kicks off its policy meeting for July. The Japanese yen was also up slightly against the USD.
The weaker dollar is having the uncommon effect of boosting stocks and gold at the same time. Meanwhile, safe-haven investment has been steadily flowing back into the bond market, which has sent U.S. Treasurys rising. The yield on the 10-year note continued to slide down to 2.26% in response to the greater demand.
Another factor contributing to the shaky dollar is the repeated failure of the new healthcare legislation working through the U.S. Senate. As the effort to repeal or reform “Obamacare” stalls, this causes other popular White House initiatives like tax reform and deregulation to be pushed further into the future. This delaying of President Trump’s priorities due to the battle over healthcare is partially to blame for the weaker dollar and the uptick in safe-haven demand from investors.
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