Morning Market Update July 22: 3, 2, 1, Liftoff!

July 22nd, 2013 by

Gold opened $20 higher than the Friday close to begin the week in Asian trading, to hit a five-week high of $1,327 an ounce amid a flurry of stop-loss action.

Typically thin volume for July combined with a number of factors to shatter the psychological resistance at $1,300. Fed Chairman Ben Bernanke late last week convinced markets that the government’s $85 billion a month bond buyer program wasn’t ending soon. Then Saturday, the G-20 conference of leading nations endorsed quantitative easing by announcing a policy of “growth before austerity.” Sunday elections in Japan gave prime minister Abe’s coalition a decisive majority in the upper house of Parliament. The coalition now controls both houses of Parliament, insuring Abe’s quantitative easing policies will continue. Finally, China’s removal on interest rate floors for bank loans was seen as helping boost the economy.

All this combined to make the yen stronger, oil higher, and the dollar weaker, which boosted copper and other commodities, and helped silver. The weaker dollar and expected continuance of the global QE regime boosted all precious metals. At 10am, gold was up over 2%, silver up over 4%, and platinum up over 1%.

If gold can manage a close above $1,300 today, it may seal the deal on setting a near-term bottom on the charts.

Thin volumes are especially affecting stocks in Asia, where Chinese and Hong Kong ended slightly up. The Nikkei ended up nearly .5% after a day of choppy trade.

European stocks were lifted by news that Germany’s economy “expanded strongly” in the second quarter, and Swiss bank UBS beat earnings forecasts. Portugal’s avoidance of snap elections was also seen as a good sign, and helped Italian and Spanish bonds improve.

Wall St. opened flat after setting new records on Friday, as disappointing earnings from McDonalds weighed.

by David Peterson