Gold saw a sharp short-covering rally at the New York open this morning to blow through a 3-week high, after getting two separate boosts in Euro trading overnight. Silver was right up there keeping pace, Platinum is also solidly higher, breaking the $1,400 mark. Palladium, which has been outperforming the other precious metals lately, is up moderately in volatile trading.
Physical gold buying in China is reported strong, for two reasons today. The low overnight prices which led to bargain hunting, and the rush among Chinese gold importers to use up their quota and to stock up ahead of the Chinese New Year (which is January 31.) Gold importers are given quotas by the Chinese government, and with the economy improving, they don’t want to have their next quota reduced for not using up the current one.
It’s becoming generally accepted that precious metals have “priced in” the Fed taper, and perhaps have been oversold.
Stocks are down world-wide after speeches by St. Louis Fed President Bullard, and Dallas Fed President Fisher brought much greater expectations of a tapering of the Federal Reserve’s $85 billion a month in quantitative easing measures. We will cover those strong remarks in detail later today.
Also hitting stocks is word that Steny Hoyer, the #2 Democrat in the House, is unhappy with the budget deal being worked out by a bipartisan committee, and may led opposition to it. This has helped stocks break their tunnel vision over the taper, and start looking forward to another budget and debt ceiling battle next month.
The dollar, which dropped in late trading Monday, is still in the red, weaker against all major currencies. The euro hit another 6-week high versus the dollar at 1.375, and a 5-year high (that’s not a typo) against the yen. The yen itself is actually stronger against the dollar today. The renminbi is at new highs versus the dollar as well, at 6.07
The British pound is at 2-year highs at 1.644 in dollars, as the UK economy continues to roar out of recession. Perhaps the rest of the West should take note of what they did.
There was also good news for Europe, as industrial output in Italy grew at a 0.5% rate in October. This is the second month of expansion, after a 0.2% gain in September.
Stocks in the U.S. opened lower in volatile trading, a day after the S&P 500 inched to a new record. Traders are taking profits ahead of next week’s FOMC meeting. Since it’s the end of the year, they were getting ready to, anyway, but taper fears have just accelerated the process.