Gold continues its rally this morning, hitting a two-month high overnight of $1,272. Both Gold and Silver saw a boost in European trading. Platinum is lower as platinum miners and mining companies work toward an agreement, which has drug palladium lower. Gold saw its biggest one-day gain in three months on Thursday, in heavy volume, and has a five-week winning streak going.
Violent protests in Ukraine, Turkey, Thailand and Argentina has led to a flight from emerging markets and warnings of an economic “global contagion.” The Turkish lira and Argentine peso hit record lows last night. Brazil’s real hit a five-month low, and Ukraine and South Africa saw their currencies hit a four-YEAR low. The Russian rouble has devalued 4% in three weeks, and is at a five-year low. Stock markets in these countries are entering a free-fall. A Reuters report calls the plunge in emerging market stocks and currencies a “rout,” and warns that this may be only the beginning.
Safe haven demand, which had been sitting in the dollar and yen temporarily, has switched to gold as the emerging market meltdown intensifies. This safe demand is pushing gold upwards and triggering short-covering.
The dollar is flat this morning in U.S. trading, recovering from a moderate drop in Europe. The euro is lower, while the yen is up. The yield on the 10-year Treasury continues to drop on safe haven demand, and is now at 2.74%.
Stocks opened lower in New York, a day after the Dow closed at a five-week low. Good earnings reports from Microsoft and Bristol-Meyers were not enough to counteract the emerging market meltdown and reported contraction in Chinese manufacturing.
European shares were down, as companies with large exposure to emerging markets were hammered and fears increased of nearby Ukraine devolving into anarchy after brutal government crackdowns on protestors.
Asian markets were hit hard, with the Nikkei at a one-month low, and Hong Kong’s Hang Seng closing at a 10-week low. An economic slowdown in China is especially painful for its Asian neighbors, many of whom depend on raw commodity demand from China.