The revelations in the FOMC minutes yesterday continue to reverbrate through the global markets this morning. The dollar continues to gain strength, hitting a three-week high overnight, while oil hit a six-week low. Both these trends are bearish for precious metals.
Morning gold is slightly up from the 8.5-month low it hit overnight. Paper gold was not immune to the sentiment, as the SPDR gold ETF yesterday saw the largest one-day outflow in 18 months. Platinum and palladium also continue sharp declines with platinum hitting a five-week low, but analysts believe that the PGMs were due a correction after rising so far so quickly.
Part of platinum’s pressure came from unexpected signs of contraction in the Eurozone economy, with the Markit Euro PMI dropping a stunning 1.3 points to 47.3, while analysts expected a 0.4 point gain to 49.0. Chris Williamson, chief economist at Markit, said that if it weren’t for the German economy expanding and pulling the average up, the news would have been much worse. The gloomy news helped the euro decline even more than it had against the strong dollar, hitting a six-week low. Italian bonds are higher and their stock market lower, on the fears of a Berlusconi win in the upcoming elections.
The pound sterling hit its lowest level versus the yen in history, with records going back to the 1980s, according to Reuters. The sterling also hit an 8.5-month low against the dollar, as investors flee what is increasingly seen as a risky currency.
Asian markets, including Japan, were down overnight, firstly on the news of the FOMC minutes, and then as the Chinese government implimented the deflationary measure of pulling a record amount of cash from the market to shrink the money supply. Beijing cited concerns over rising housing and food costs when announcing the measure.
All was not gloom for precious metals in Asia, as the Shanghai Gold Exchange saw its largest volume in history on Monday, as Chinese buyers hit the market to grab bargain basement gold after the week-long Lunar New Year holiday. Monday’s volume exceeded 22 metric tonnes of 9999 gold. While off Monday’s all-time record, volume remains high this week.
In the U.S. the S&P 500 saw its biggest drop since November after the FOMC minutes revealed growing dissention at the Fed regarding the $85 billion a month money printing policy, citing concerns over inflation and market distortion. Today’s economic news of first-time jobless claims rising 20,000 to 362,000 last week, and a CPI report that was basically flat may calm some jitters, but more and more analysts are considering the market overheated and due a correction.