Gold saw some profit-taking in Europe overnight, after hitting a high of $1,344 on Tuesday (another four-month high).
Cautious traders bailed in morning trading in New York, as news that new home sales in January unexpectedly hit a 5 1/2 -year high sent the previously languishing dollar sharply upwards.
The surprise good economic news pulled stocks out of an early-morning dive, and led the major indexes higher. This is the first really positive news U.S. markets has seen in a while, and calls into question the “blizzard excuse” used for recent downbeat reports. New home sales for January were up 9.6% over December, and up 2.2% from January 2013. The Northeast U.S. saw a massive 73.7% jump in sales. Last week, existing home sales for January had posted a 5.1% decrease, to the slowest pace in a year and a half. That may partly be due to lack of pre-owned home inventory.
Stocks in China were modestly higher overnight, on both the Shanghai and Hang Seng indexes. Tokyo’s Nikkei index was down .54%, reacting to yesterday’s weak U.S. economic data.
European markets were weighed down on disappointing performance from megabanks Credit Suisse and UBS.
Demonstrations are rocking eastern Ukraine, as Russian-speaking protestors wanting union with Russia are met by ethnic Tartars, who remember the atrocities they suffered at the hands of the Soviet Union. The Tartars, a Ukrainian-speaking minority in the east of the country, want to remain part of a westward-looking Ukraine. The provisional government is dealing with the economic mess left by the regime deposed president Viktor Yanukovych. The government is days away from bankruptcy, as Russian president Putin puts pressure on them. Although Ukraine fills 80% of its energy needs by buying Russian natural gas, the government recently cut purchases as an act of defiance against Putin, and are looking for outside sources.
In response to the unrest, and as a warning to Ukraine, the Russian Army has begun conducting “war games” near their common border. Putin has also suspended a promised $15 billion loan he had offered Ukraine for turning its back on the EU and strengthening ties with Russia. The Russian ruble has fallen to five-year lows, in part over the instability and threats regarding Ukraine.
In other world news, demonstrations continue in the four-month long protests against Thailand’s government over corruption charges. There was a run on a government-controlled bank last week, as depositors scrambled to empty their accounts after reports that the bank was being forced to make loans to a government agency responsible for paying subsidies to rice farmers.
Venezuela looks to be edging closer to civil war, as pro- and anti- government demonstrations grow in size. Pope Francis has called for calm in the overwhelmingly Catholic nation, hoping to influence leaders on both sides.
The government of Turkey is being rocked by a recording supposedly of the president and his son, discussing where to hide money they have received as payoffs for favors. This is only the latest scandal in the corruption-ridden government, which has purged the judicial system of anyone investigating allegations against officials, and is now censoring the Internet to prevent news unflattering to the government from entering the country.
All this unrest on three different continents is providing a safe haven “fear floor” for gold. The yellow metal has found support this morning at the $1,325 level, while $21 has proven to be a support level for silver. Physical gold buying out of China remains strong, with UBS estimating that gold exports to China from Switzerland and through Hong Kong totaled 96 metric tonnes last month. This compares to only 20 metric tonnes in January 2013.
New Fed chair Janet Yellen is scheduled to give her storm-delayed remarks to the Senate Finance Committee tomorrow, but is not expected to deviate from the script she used when testifying to the House last month. Dollar bulls are hoping that the emphasis on tapering the Fed’s “money printing” practices will give support to the beleaguered greenback.