Markets will be closely watching the tone and specific language of today’s monthly announcement from the FOMC for signs about the timing of the Fed committee’s first increase to the federal funds rate since before the financial crisis. The changes to the FOMC’s forward guidance promise to be subtle, with the minor adjustment of key phrases like “risks nearly balanced” to simply “risks balanced” signaling a good chance that monetary policy tightens at the committee’s September meeting, as most market analysts predict. While stocks will predictably be hesitant until after the announcement at 2 pm EST, the precious metals opened mixed but perhaps cautiously on an uptrend: silver and palladium added about 0.15% and 0.30%, respectively, while gold and platinum opened trading unchanged, with the yellow metal just below $1,096/oz.
Spot gold opened steady this morning at $1,095/oz as yesterday’s spillover from the plunge in Chinese equities looks to be contained today; although Shanghai lost another 1.7% overnight, stock indices in Europe and the U.S. pointed higher this morning. The precious metals also looked to bounce back: silver was 0.4% higher at $14.70/oz, and palladium (which has had an odd affinity with silver over the last month or so) gained $4 (0.65%) to $620/oz. Platinum, which has tracked lower with gold recently, was $4 lower at $982/oz.
Stock indices in Europe and the U.S. followed Asian stocks lower this morning as the entire region saw heavy losses on the exchanges overnight. Japan’s Nikkei 225 lost nearly 1%, the Hang Seng index (Hong Kong) slid by more than 3%, Taiwan’s TSEC index fell 2.4%, and Shanghai led the way at a staggering 8.48% lower—the worst single-day loss for the index in over 8 years.
Keep in mind this freefall occurred despite the rule that no individual share listed on the Shanghai exchange can fall more than 10% in a single trading day before it’s frozen. This helped pull European shares nearly 2% into the red this morning while U.S. indices pointed lower, likely tracking into the negative right along with their counterparts around the globe. The precious metals spot prices opened slightly in the red this morning: Gold: -$4 (-0.4%) to $1,096/oz; Silver: -10¢ (-0.6%) to $14.75/oz; Platinum: -$9 (-0.9%) to $983/oz; Palladium: -$3 (-0.5%) to $626/oz.
This morning’s open spelled another day spent in the red for gold and silver, as the precious metals continue to notch fresh multi-year lows. In addition to the potential rate hike from the Fed and the easing of risk on the international stage, the technical pressures on the metals have come from traditional sources: the value of the dollar and crude oil prices. As a commodity, gold often tracks with crude prices, and as a store of value, gold denominated in USD loses its relative value when the Greenback is particularly strong. Clearly, the dollar’s nearly year-long bear rally and oil’s 50% drop from last summer are finally having their expected effect on the precious metals. Gold futures pointed even lower than this morning’s spot price at $1,084/oz, a 5-year low. Silver slumped to another 6-year low at $14.60/oz. Meanwhile, the Platinum Group metals were mostly flat.
The precious metals opened slightly firmer this morning thanks to the dollar falling more than 0.4% on the DXY index to 97.18 this morning. This development, along with the news that Greece is progressing in its debt discussions with its European creditors, is helping push the euro near $1.10 again. The positive correction for the metals may be capped during trading today thanks to jobless claims dropping by 26,000 to 255,000 new claims this week, the lowest levels in 42 years, dating all the way back to the Ford Administration. The outlook for U.S. indices was clouded at this morning’s open despite the strong jobless claims data, while both European and Asian shares were in the green. Spot gold was about $3 higher this morning, while platinum and palladium gained 0.6% and 0.8%, respectively. Silver, meanwhile, was mostly flat at $14.88/oz.
Precious metals prices were pressured sharply lower again this morning, each falling by more than 1% in early trading this morning. The metals, especially gold, continue to get bashed in the mainstream media after losing ground on 7 of the last 8 trading sessions. We are entering the deepest trough of the summer doldrums in the commodities cycle, as a general slowdown of global economic activity this year is weighing heavily on all kinds of raw materials. At the same time, however, stocks are also trading lower today on the back of what investors are perceiving as underwhelming corporate earnings reports from tech firms like Apple and Microsoft.
Headlines were dominated by gold’s dramatic $35 drop on Monday, with even the mainstream financial news taking notice. Britain’s Financial Times touted “gold bugs squashed,” assuming that one particularly painful trading day somehow invalidates the entire precious metals market, along with all the rationales for holding physical metals. (We know this is hardly the case.)
While the financial pundits have a field day with bashing gold, the precious metals looked to rebound this morning, with spot prices advancing by about 0.5% for gold to $1,105/oz. Silver gained 1% to just under $14.95/oz, and platinum was 0.75% higher at $990/oz. Palladium, always the oddball, led the way 1.8% higher at $619/oz. Nonetheless, the drag on the precious metals is unlikely to abate in the coming days as a confluence of bearish influences take hold: 1) everyone’s worries about the Fed raising rates (and boosting the dollar); 2) a momentary resolution of international conflicts (Greece, Iran) is peeling away safe haven demand; and of course 3) the seasonal summer downturn for commodities in general. This should provide a great buying opportunity for value-minded investors who understand the benefit of holding bullion.
During trading in Asia, in the early hours of the morning, the precious metals took a nosedive. After spending all of last week in negative territory, gold fell another $25 per ounce overnight, briefly sending spot prices below $1,100/oz—levels not seen in at least 5 years. Silver also fell below $14.90/oz before briefly recovering, while platinum and palladium were off 1.5% each.
While many are citing a hawkish Fed and risk-off in Greece as the main drivers for the price drop, there is also the prospect of high-volume gold sales on the Chinese markets, as well; with the rout in Chinese equities, a large fund is suspected of selling its gold holdings to cover calls coming due on speculative positions. Some bearish sentiment may also be attributable to last week’s announcement of China’s updated gold reserves, which were well below what many market observers expected despite rising 57% from the last announcement in 2009.
After years of speculation and clandestine purchases of gold bullion by the Chinese government, the country has finally released its official gold reserves for the first time in 6 years. The People’s Republic revealed that it currently holds 1,658 tonnes (53.3 million troy ounces) of gold bullion, up from 1,054 tonnes at the last update in 2009. Although this represents an increase of 57% over that span, the aggressive gold-buying by the Communist regime had led many observers to venture numbers that are twice as high for China’s reserves, so it still remains possible that China’s “unofficial” gold reserves are even higher.
The dollar has been on a surge this week, aided in part by the settling down of the situation in Greece. Now that the parliament approved creditors’ austerity measures and a new $7.6 billion (€7 billion) loan has been agreed to in principle, the markets are likely to view Greece and Europe with a risk-off attitude (despite what may be in store for the battered Greek economy and leftist government). The dollar advanced above 97.5 on the DXY index, driving the euro to about $1.085 and the yen above 124 per dollar. The precious metals trickled further back in the meantime, as gold fell about 0.5% to just below $1,145/oz, a fresh 8-month low. Silver and the Platinum Group Metals were further off, each down by more than 1%. Silver hovered just above $15/oz, while platinum and palladium threatened to fall through key support levels.
Markets were abuzz with the news that Fed Chair Janet Yellen, in her semiannual hearing in front of Congress, was clear that so long as the labor market continues to show signs of improvement, the Fed remains on track to increase the federal funds rate in 2015, the first time it would be lifted in nearly a decade. In fact, she revealed that FOMC forecasts actually call for two 25 bp (0.25%) increases to the rate this year. Chair Yellen will again be speaking before the Senate tomorrow after addressing the House Financial Services Committee today. U.S. indices showed little change at this morning’s open, though the Nasdaq rose about 0.3%, while the metals began trading in the red. Gold and platinum were each about 0.7% lower, while silver led the way, off by nearly 2%. Continue Reading
The news this morning was that negotiating teams from Iran and a coalition of Western countries led by the U.S. have arrived at a preliminary agreement regarding Iran’s nuclear program. The move should not only set into motion a gradual lifting of economic sanctions against Iran, but will also free up Iran’s impressive crude oil stockpile (they are the world’s 4th-largest reserves) for the open market. This helped drive crude oil prices lower this morning while also fomenting dissatisfaction with the Israeli government, which has denounced any deal with Iran as a mistake. The precious metals opened flat, though indications were that it may turn out to be a trading day in positive territory for the PMs.
Global stock indices opened in the green this morning as Greece finally conceded to creditors’ demands over the weekend. The new deal amounts to a third enormous bailout for the Greek government, totaling €86 billion ($96 billion). Although markets are initially exuberant on the risk-off sentiment of Greece reaching a deal to remain in the eurozone, all may not remain calm on the seas of Europe: Greek PM Alexis Tsipras now faces political backlash in his home country after reversing a considerable number of campaign promises to reject more austerity measures from creditors, as a whole series of reforms to Greece’s economy are tied to the bailout funds. Wall St pointed higher on Monday morning while the precious metals each opened about 1% lower, excepting palladium, which added 1.5%.
The melodrama in Greece remains fluid, as a new proposal on economic reforms has been submitted to the country’s creditors for review. In addition to providing all of the comedy and suspense of a Greek tragedy, the debt saga has also taken an ironic turn: as the two sides near a deal, it appears the very measures that the Greek voters rejected by voting “No” in last week’s referendum will, in fact, be put into place. How long it takes this reality to unravel the political capital of Prime Minister Alexis Tsipras and the Syriza party is still up in the air. The Sunday deadline for an agreement looms. Nonetheless, markets responded positively to the closeness of a new deal for Greece, with U.S. indices pointing higher at this morning’s open, while the precious metals also made modest gains.
The precious metals opened in the red again this morning as the dollar remains robust and tempered optimism about Greece abound. Though the DXY fell about 0.33% to 96.5 this morning, the yen and the pound sterling both lost ground against the greenback. As the gold bears have wrested control of the market again, the metals look ready to extend their losses throughout the week before bouncing back after the Greek situation comes into a bit better clarity. With Asian markets deeply in the red and Europe moving into positive territory, U.S. indices opened more than 1% lower this morning.
After largely holding their positions over the last few uncertainty-filled weeks, the precious metals fell through support this morning, as gold lost more than 1% to slip below $1,160/oz and platinum slid 1.5% to about $1,050/oz. Palladium slumped more than 2.5% lower to $665/oz, while silver led the downward charge at 3.3% lower, $15.30/oz. The stronger dollar is helping push the metal prices down further. European shares were down again as well as markets await some new development in the Greek crisis.
UPDATE: After Greek officials looked to delay the submission of a new proposal to their European creditors, Wall St sank to about 1% in the red, while the precious metals continued to tumble:
Gold: $1,154.40/oz (-$16.40, -1.40%)
Silver: $14.97/oz (-$0.88, -5.56%)
Platinum: $1,041/oz (-$27, -2.54%)
Palladium: $649/oz (-$35, -5.15%)
After a 61% “No” vote in this weekend’s referendum, the Greek people have given a vote of confidence to their government to continue drawing a hard line in negotiations with their creditors in Europe. In order to facilitate further discussions, polarizing finance minister Yanis Varoufakis has announced his resignation, though Jeckyll-and-Hyde prime minister Alexis Tsipras remains at the helm.
Interestingly, the reaction in Europe was muted; although most of the continent’s stock indices opened in the red this morning, the euro remained steady, holding above $1.10. The dollar was slightly stronger at 96.45 on the DXY, keeping gold and silver flat at this morning’s open while platinum (-$36) and palladium (-$25) lagged behind. U.S. stock index futures tracked lower with their European counterparts on the uncertainty still surrounding Greece’s future.
With the 4th of July falling on a Saturday this year, U.S. markets will honor the holiday a day early by closing for the entire day. (We are one of the few U.S. dealers in the industry that will be open today, in fact.)
Open exchanges in Asia and Europe were down almost across the board as the Greece vote looms, though Japan’s Nikkei poked just barely in the green. The precious metals opened mixed on what will likely be a slow day of trading; Spot gold was marginally lower, joined by palladium, while silver and platinum both moved slightly higher in the morning. Silver and platinum have had a trend in the last two weeks of advancing in tandem at the expense of gold as investors look for alternative precious metal purchases.
Even with the continued high-wire act Greece is trying to pull off with its European and international creditors, American investors across the Atlantic seem fairly confident that the U.S. markets will remain largely insulated from any spillover from the situation blowing up in Europe. The dollar has been gaining against the euro as the scenario remains fluid, causing funds to flow out of euro-denominated assets into those measured in USD. This has held down gold prices, which opened Wednesday about $12 per oz lower at $1,170/oz.
All eyes will remain on Greece for as long as the impasse drags out; with European banks and investors shedding their exposure to Greece ahead of the national referendum on the country’s next move with creditors, it’s only a matter of time before Greece crumbles and defaults, even with deposits secured through capital controls. If nothing else, Greece has lost the trust of its negotiating partners, which all but seals the end of discussions.
Greek Finance Minister Yanis Varoufakis has remained defiant that his country will not endure the austerity that Greece’s creditors in Europe insist upon. Prime Minister Alexis Tsipras boldly declared that European leaders wouldn’t dare throw Greece out of the eurozone, striking a combative tone even with his government on the brink of default. Yet, this morning, the Greek premier asked Europe for another 2-year bailout program while negotiations continue. Nonetheless, Greece is still set to enter arrears—default—on its IMF loan at midnight, becoming the first EU country to do so.
In spite of their fiery rhetoric, the debt-ridden Greek government is well on its way toward the largest sovereign default in history, and a possible 40% devaluation with the return to the drachma as national currency. In fact, with Greece at odds with its begrudging partners in Western Europe, the former Warsaw Pact countries in Eastern Europe are no more sympathetic to the plight of their Greek counterparts, fed up with Greece’s cries of being victims when most of its people—even now, amid crisis—enjoy much higher standards of living than those in Bulgaria, Lithuania, etc.