Spot Gold Higher In Choppy Trading

September 19th, 2017 by

© Alexmoe | Dreamstime.com

© Alexmoe | Dreamstime.com

The precious metals were mixed in early trading, with gold and silver slightly above unchanged and the Platinum Group Metals losing considerable ground. Spot gold was fairly volatile on Tuesday morning, but stabilized around $1,309/oz, slightly in positive territory. The silver price similarly rebounded back to above unchanged at $17.20/oz after opening lower. Platinum slid by about 1% and palladium staggered nearly 3% into the red.

Monday’s closing numbers were as follows:

Gold: $1,307.10/oz (-$12.10, -0.92%)
Silver: $17.17/oz (-38¢, -2.14%)
Platinum: $960/oz (-$8, -0.83%)
Palladium: $928/oz (+$13, +1.42%)

Dow Jones: 22,331.35 (+63.01, +0.28%)
S&P 500: 2,503.87 (+3.64, +0.15%)
Nasdaq: 6,454.64 (+6.17, +0.10%)
DXY: 92.04 (+0.10, +0.11%)
WTI crude: $49.93/bbl (+4¢, +0.08%)

Investors and traders were responding to U.S. housing data on Tuesday that was equally mixed. Housing starts (i.e. construction on new homes) fell by 0.8% during August, according to the Department of Commerce. Overall, hurricanes Irma and Harvey were not seen as having a major impact on the reading, because the data was mostly driven by higher starts in the West and Midwest and a considerable decline in the Northeast.

At the same time, the report on housing showed that new building permits soared 5.7% during the month, pointing toward higher levels of construction in the coming months. The destructive weather in the American South the last two weeks did have the effect of pushing West Texas Intermediate (WTI) crude prices back above $50 per barrel.

Much of the attention of the markets will be trained on this week’s Fed Open Market Committee (FOMC) meeting. The U.S. dollar slipped 0.25% on the DXY index to 91.8 ahead of the first day of the FOMC gathering, while improved investor confidence in Germany helped push the euro back toward $1.20. Global stocks were—does anyone else hear a broken record?—a mixed bag, although Japan’s benchmark Nikkei 225 stood out with a nearly 2% advance as traders returned from holiday.

Fed Chair Janet Yellen testifying before Congress (photo: Federal Reserve)

Fed Chair Janet Yellen testifying before Congress (photo: Federal Reserve)

As the FOMC meets today and tomorrow, many investors are growing impatient with the central bank’s equivocation of the challenges facing the economy. The Fed is beginning to exhaust its excuses for sub-2% inflation and stagnant wage growth as its self-imposed time frame to begin normalizing policy is fast approaching.

It remains unclear what the Fed will decide tomorrow, although many expect to see no rate hike and an indication of at least a modest reduction of the central bank’s $4.5 trillion balance sheet, bloated by years of quantitative easing (QE). There is also justifiable concern that this unraveling of economic stimulus could cause major dislocations in the bond and stock markets.

In any event, holding some gold as a hedge against uncertainty and disruption in the financial markets is an eminently reasonable approach.

 

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.