Gold hit a one-week high this morning in New York, breaking $1,400 and pushing against the important $1,413 level. If gold can keep or break $1,413, more forced short covering should lead to higher gains today.
In addition to the short covering and weaker U.S. dollar, a good amount of safe haven action out of Asia is supporting gold this morning. The Nikkei saw another big drop, losing 5% as the yen gained against the dollar. Hong Kong stocks hit a one-month low as traders rotate out of high yield stocks, and Chinese stocks eased off yesterday’s two-month high.
In Europe, stocks were steady, as the euro hit a two-week high against the dollar. A broad range of economic sentiment reports all showed improvement (though some remained in negative territory), as European car sales rose 1.8% – the first increase since September 2011. Some analysts are predicting that the Eurozone will emerge from its 18-month recession this summer.
In the U.S., first-time jobless claims rose more than expected, climbing 10,000 to 354,000. Analysts expected 340,000 claims. In addition, last week’s first-time claims were adjusted up 4,000 to 344,000. The four-week average of first-time jobless claims rose 6.750 to 347,250, the highest in four weeks. Continuing claims increased 63,000 to 2.97 million, and the four-week average of continuing claims dropped 11,500 to 2.99 million.
The government revised first quarter GDP down 0.1% to 2.4%, an revised consumer spending 0.2% to 3.4%. Business capital expenditures and government spending were adjusted down. Pending home sales were reported up 0.3%, with shortage of available homes cited as a reason for the weak increase. Another factor is the rapidly rising price of homes, which is enticing banks to negotiate higher prices for foreclosed properties, or to hold on to them in order to get more of their money back.
Stocks opened higher in New York this morning, as the 10-year Treasury yields ease off their 13-month highs hit earlier. Both oil and the dollar are weaker for the second day in a row – oil due to fears of an economic slowdown in China, and the dollar because of a rising yen. Barclays attributes at least part of the recent dollar weakness to month-end adjustments, and hedge funds rotating their currency holdings out of the dollar.
Safe haven demand for gold in Asia today hits a market already seeing supply shortages at the retail level. Premiums on gold bars remains at an all-time high in Singapore. In an interesting development in the West, the SPDR gold ETF, the world’s largest, actually saw inflows on Wednesday. At 10:30 am Eastern Time, spot gold is up $22.60 to $1,415.30, and spot silver is up 54 cents to $23.00.