Midday Market Update August 16: Metals Hanging Tough

August 16th, 2013 by

Precious metals are tenaciously hanging on the their eye-opening gains from yesterday, even in the face of a recovering dollar. Gold is slightly up from yesterday’s close, while silver has tacked another 1% gain. Silver has been far and away the best performer in a week that was good for metals, having now advanced into a bull market. Platinum and palladium are slightly down from yesterday’s close, despite labor unrest in South Africa, the world’s largest producer of platinum.

Some of the dollar’s late recovery in U.S. trading could be attributed to safe haven action, as Egypt’s military imposes a state of emergency after yesterday’s violence left over 500 Egyptians dead, mostly protesters rallying for the fundamentalist Muslim Brotherhood and their leader, ousted president Mohammed Morsi. These developments are also buoying demand for gold in the region as a safe haven.

The violence is weighing on Wall St., where the rally seems to have stalled out. News that billionaire George Soros has placed a $1.25 billion bet on the S&P 500 falling has also dampened enthusiasm.

Today’s economic news hasn’t helped, as consumer confidence was reported down, and housing starts rose less than expected. Treasury yields are still near two-year highs as the market braces for the possibility of the Fed starting to reduce its $85 billion a month bond purchases next month.

In Europe, the composite trade surplus for the 17-nation organization was reported to have grown as imports dropped, and inflation numbers came in well below levels that would scare the European Central Bank off its accommodative monetary stance. However, worries over the violence in Egypt kept shares mostly flat.

In Asia, the Nikkei dropped 0.8% over a downbeat banking sector and fear over U.S. Fed tapering. In China, a sudden 5.5% jump in the stock market was blamed on a massive trading error. Once the news got out, the rally vanished, leaving Shanghai shares down 0.6%.  Hong Kong followed the wide ride up and down, ending down 0.1%.

Despite concerns that thin volumes are contributing to this week’s gains in precious metals, it seems that gold and silver are going to hold onto their gains until the markets close for the weekend.


by David Peterson