Morning Market Update Feb 22

February 22nd, 2013 by

Gold is near unchanged this morning in New York as the various Fed presidents hit the airwaves to calm the market after yesterday’s release of the minutes from the latest FOMC meeting spooked stocks and PMs.

Euro stocks were up on good economic news from Germany, where the Ifo business confidence index reported a 10-month high and better corporate earnings reports. All was not sunshine and roses, however, as the European commission forecast the Eurozone economy to shrink for the second year, at -0.3%. Investors are on edge as the Italian elections loom, with the possibility of former prime minister Berlusconi winning and scrapping the austerity program and economic reforms put in place by an emergency government last year.

The Nikkei was up overnight on bargain hunting, while Chinese stocks were sharply down for a second day. The Chinese government withdrew a record amount of liquidity from the economy yesterday amid inflation concerns, and investors decided this was a good time to lock in profits. The Chinese stock index has gained a staggering 30% in two months, so a sell-off was overdue.

The dollar is still near its three-month high, and oil is slightly up from a six-week low. Stocks in New York opened higher after yesterday’s sell-off, as investors shook off worries the Fed was going to shut off the money firehose this year. The looming sequester, only seven days away, hasn’t seemed to affect the exuberance of Wall St. Perhaps they have rationalized the projected $85 billion in spending cuts slated for 2013 is equal to just one month of money printing by the Fed?

Physical demand in Asia and some bargain hunting elsewhere is helping gold hold steady today, as more analysts consider the yellow metal oversold and are expecting a bump. The platinum group metals are recovering from their recent corrections today, as reports that Russia has ceased palladium exports to Switzerland and a positive outlook for U.S. auto sales lend support.

by David Peterson