Morning Market Update July 2

July 2nd, 2013 by

Gold saw a small spike overnight at the London open and in late Asian trading, despite the dollar’s gains in Europe. The euro weakened slightly as the extent (and expense) of massive flooding in Germany has become more apparent, and as EU officials give the Greek government an ultimatum over reforms, threatening to withhold the next round of bailout money.

However, data released today on the U.S. economy erased those gains in early morning trading in New York, as the news is thought to increase the probability of the Federal Reserve reducing its quantitative easing measures.

Oil is higher on unrest in Egypt, as the military there gives President Mursi 48 hours to resolve the complaints of literally millions of protesters nationwide. These developments should give gold a little safe haven demand.

In Asia, the Nikkei was up 1.8% to finish above 14,000 for the first time in five weeks, helped by a yen that weakened past the 100 mark against the dollar. Chinese stocks finished slightly higher, but Hong Kong stocks fell, pulled down by a banking sector disappointed that the Peoples Bank of China did not inject a larger sum of money into the economy yesterday.

U.S. stocks opened higher, as year over year home prices for May were reported to have risen at 12.2%, the fastest clip in over seven years.  Home prices were up 2.6% from April. New orders for factory goods in May are reported to have risen 2.1%, in line with forecasts of 2%. April’s numbers were revised upward to 1.3% from 1%. This two straight months of increases points to an economy recovering from cuts to defense spending.

With physical demand reported to be recovering in Asia, and gold prices remaining below operating costs for a large percentage of gold mines, more analysts are advising that gold has been oversold. With drama in Egypt and Europe, light volumes, and reduced trading days in this holiday week, expect large swings in all markets, including precious metals.

by David Peterson