Precious metals gave up most of this week’s gains in early New York trading, as fears of Fed tapering and rumors of a noted QE “hawk” being offered the #2 job at the Fed sends global stock markets lower for another day.
Gold and silver saw what is becoming a suspiciously familiar two-step beat downward again in Europe overnight, and declined early in New York on reports that retail sales in November grew slightly more than expected (+0.7% vs an expected +0.6.) The gain was fueled mostly by new car sales. Platinum group metals, which have been doing better than gold lately, saw a large decline early in New York, possibly on a large fund rebalancing its books, and sell stops being hit.
The dollar spiked this morning, with the DXY regaining the 80 level. The greenback is up against all major currencies. This is another bearish factor for gold this morning.
Wall St opened mixed, after yesterday’s declines. The market experienced it worst 1-day drop in a month on Wednesday, and resumed the downward motion this morning. The Nikkei in Japan hit a 1-week low, and Hong Kong shares hit a 4-week low. EU stocks were down on a surprise contraction of composite industrial output, which dropped 1.1% against expectations of a 0.3% gain. This just piled onto the taper fears, sending stocks lower.
Indications that a partial budget deal in Washington might actually be passed by Congress before the end of the week has greatly magnified fears of a December taper. These fears are fanned even higher by rumors of a “QE hawk” being offered the #2 job at the Federal Reserve.
Stanley Fischer, who holds dual U.S. – Israeli citzenship and was until recently the governor of the Bank of Israel, has reportedly been offered Janet Yellen’s old job as Vice-Chair of the Federal Reserve. Fischer, who formerly taught economics at MIT, was Ben Bernanke’s doctoral thesis adviser, and also taught Mario Draghi and Larry Summers.
The 70 year-old Fischer took Israeli citizenship when offered the job of running the Bank of Israel (a requirement for accepting the position.) He also has served as #2 executive of the International Monetary Fund. Fischer is known for squashing abuses in the Israeli housing market, and also gained experience fighting hyperinflation in Israel during the 1980s.
He was the first central banker to cut interest rates at the start of the 2008 financial crisis, and was also the first to raise rates again. The odds of tapering and rises in the federal funds rate escalate greatly should he become Fed Vice-Chair, which is spooking stock markets world-wide, that have become addicted to billions of dollars of “free money” from the US every month.
Speculation is starting that China will update the public amount of its gold reserves next year. It seems to do so every five years, so a new official report is due next year.