Friday morning was a resounding win for the precious metals, which have been gradually climbing off of last week’s lows for the past several trading sessions. Gold prices rose 0.6% at the opening bell in New York, rallying to $1,252 per ounce, a fresh three-week high. Spot silver posted even more impressive gains, adding 16¢ (+1%) to move just shy of $16.50/oz.
Meanwhile, platinum also advanced better than 1% while palladium was up more modestly, adding roughly 0.25%.
Deluge of Dollars
The main driver of the activity in the gold market this morning was the ongoing slump for the U.S. dollar. First, here’s a rundown of Thursday’s closing numbers:
Gold: $1,244/oz (+$3, +0.24%)
Silver: $16.31/oz (+5¢, +0.31%)
Platinum: $926/oz (+$7, +0.76%)
Palladium: $843/oz (-$13, -1.52%)
Despite diverging from the other precious metals yesterday, palladium remains the top gainer among the group year-to-date.
Stocks were mostly flat on Thursday, and continued to lack any clear direction on Friday. Global equities were in the red around the world, as well.
The performance of the world’s major currencies lies at the heart of Friday’s market movement. The euro and dollar have been charting divergent paths all year, and a more hawkish approach from the European Central Bank (ECB) appears to be exacerbating this development. This morning, the DXY index slid another 0.25% to just 94.1, a fresh 11-month low for the index.
Naturally, the euro is by far the biggest component of the DXY, making up more than half of the currency basket. Thus, the slump for the dollar has coincided with a 2-and-½-year high for the euro. The fact that traders are convinced that ECB will begin tapering its quantitative easing program soon is undoubtedly adding fuel to the EUR-USD trade. Analysis from DailyFX does caution that these big moves are coming amid the “thinner liquidity environment” (i.e. low trading volumes) that are typical of the summer.
Strangely, the European bond market has also moved in the same direction as the forex market, an uncommon and unsustainable trend. Bonds fell in both France and Germany this morning. Less surprising is the fact that 10-year Treasury yields fell to 2.24%, absorbing some safe-haven demand. It is logical to believe, however, that some reversal will be in order later this year as the euro becomes increasingly overbought vs. the U.S. dollar.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construe as an offer, solicitation, or recommendation to buy or sell any product.