The precious metals were higher again on Thursday, vaulting gold prices to a six-week high. Spot gold was about 0.2% higher in early trading, hovering around $1,262.60/oz. In fact, the last time the yellow metal traded above $1,260 an ounce was in mid-June.
Spot silver surged even higher, adding 0.8% (+13¢) to trade at $16.77/oz. This is its highest since before the 4th of July.
Platinum prices were also 0.2% higher while palladium advanced 1.6%.
Here are Wednesday’s closing numbers:
Gold: $1,260.10/oz (+$10.50, +0.84%)
Silver: $16.64/oz (+16¢, +0.97%)
Platinum: $929/oz (+$4, +0.43%)
Palladium: $864/oz (+$9, +1.05%)
Perhaps the most consistent theme in the markets this summer has been the slump for the U.S. dollar. The USD is trading at its lowest level in over a year, dating back to last May. In the wake of yesterday’s FOMC announcement, the DXY index predictably fell, as the central bank’s language about balance sheet adjustments coming “soon” appeared rather dovish to traders and investors. The dollar is now on the precipice of wiping out three years’ worth of gains.
Bonds also sold off in the aftermath of the FOMC statement, pushing the 10-year Treasury yield back up to 2.31%. While the expectation that the Fed will be unwinding its bloated balance sheet is rather dollar positive, portending a normalization of monetary policy, many observers believe the Fed statement yesterday showed its hesitance toward doing so before the end of the year. In fact, the markets are now leaning toward the belief that interest rates will remain in lower for longer than expected in Europe and especially the U.S. The medium-term impact on the gold market from this shift is unclear, although for now it has undoubtedly helped lift the precious metals. Gold jumped about $14 per ounce in the two hours following the release of the FOMC statement on Wednesday.
Thanks primarily to the weaker dollar, but also to a developing turnaround in the eurozone economy, the euro is rallying again, trading above $1.17. Stocks in the U.S. continued to notch record-highs on Thursday while European shares also posted gains. The outlier was London’s FTSE 100, which traded about 0.2% lower. Stocks in Asia were modestly higher.
London may be shaken by the news that Libor (the London Interbank Overnight Rate), one of the benchmark interest rates in the world that was famously manipulated by the big banks, is actually going to be phased out over the next four years. This could throw a number of markets into turmoil in the coming years, as a large number of home mortgages are based off of the Libor plus a premium.
Elsewhere in the world, Venezuela continues to teeter on the brink of total economic collapse. The socialist country is suffering from food shortages and a lack of basic supplies. Hundreds have died from hunger or in street protests while thousands more have been jailed. All of the mayhem has dragged on for months (even years) as President Maduro is seeking a rewrite of the country’s constitution that most believe would simply consolidate his power. A large contingency of Venezuelan citizens are now embarking on a general strike in opposition to the Maduro government. A worsening of the problem in Venezuela would not only impact the crude oil market, but would have ramifications that ripple across the global economy.
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