Today will be a short trading day, as markets close early for the Christmas holiday. We’re in that area of thin volumes until after New Years, so any major move in the markets will have an out-sized affect on prices. Expect some not-for-profit selling for tax purposes, as traders book losses in commodities to offset profits in equities. There will also be some short-covering to remove the shorts from the end-of-year books.
Gold traded in a tight range between $1200 and $1196 over night, to see a slight improvement in New York. Silver saw a modest rally this morning in U.S. trading, after overnight selling pressure. Precious metals are holding on against a rising dollar this morning.
The dollar got a boost from better than expected durable goods orders for November, which rose 3.5%, after a 0.7% drop in October. The yield on the 10-year Treasury, which has held above 2.9% ever since the Fed’s taper announcement, spiked to 2.97% on the durable goods report, settling slightly to 2.95%.
In other U.S. news, the MBA mortgage applications report saw a 6.3% drop this week, as rising mortgage rates smother home purchases and refinancing. This points to more cash sales by large funds and banks as the drivers behind single family home sales, as they pay cash then turn them into rental properties. Reports in the media recently show how Goldman Sachs and other big banks are skirting the Volcker rule by spinning off their real estate speculation into separate companies that they then pour money into.
In Asia, the Nikkei nudged up to a 6-year high. The Peoples Bank of China conducted its first reverse repurchase operation in three weeks, to inject liquidity into a cash-starved market. The PBOC keeps withholding easy liquidity in an attempt to teach the commercial banks to not be so reckless with their funds, but they seem resistant to the lesson. The need to meet end-of-year regulatory cash levels have the banks suddenly hoarding yuan at the last moment, causing the cash crunch. We’ll probably see the same thing happen again at the end of next quarter. The Hong Kong markets closed at noon for the Christmas holiday.
In Europe, markets also closed early for Christmas, but not before posting the best pre-Christmas performance since 1999. All this is happening of course on tiny volume, so while it makes great headlines, these accomplishments should be taken with a grain of salt.
In what could be good news for gold, there are more intimations and rumors out of India that gold import restrictions may be eased in the near future. The import taxes of 10% for investment gold and 15% for gold jewelry would remain in place, but at least the devastated jewelry industry could import supplies. As inventories of gold ETFs in the West are depleted and outflows stop, the ready supply of gold on the market will decline, Combined with at least a partial resumption of demand in India, gold prices should see support.