Gold Consolidates After Crimea Vote: Morning Market Update March 17

March 17th, 2014 by

iStock_000013551810MediumGold spiked $10 from Friday’s close on the Asian open, to $1,392 an ounce, where it encountered sell-stops and began drifting downward amid profit-taking. This is a classic “buy the rumor, sell the fact” action, brought on by the apparent lack of sanctions against Russia by the West. The EU has voted to freeze assets and revoke visas of only 21 people in the aftermath of the rigged Crimean referendum approving seceding from Ukraine and rejoining Russia, with no economic sanctions against Russia itself.

Sources say that Germany has been lobbying behind the scenes against any sanctions, as it has the most to lose from a trade disruption. With reports today that EU inflation has dropped to dangerous levels, anything that could slow the economy down further will be off the table. The inflation numbers have dropped to the point where the ECB has previously stepped in and lowered benchmark interest rates, so the Euro stock markets are higher on expectations of another rate cut.

Russian stocks are also higher on the belief that there will be no real sanctions, but the rouble continues its downward path. It now trading near the point where the Russian central bank will step in with unlimited market support (which may be the reason Russia reportedly moved its U.S. Treasury holdings out of New York and brought them home. it can sell them to for dollars that it can then use to support the rouble.)

factoryWall St. opened sharply higher after closing at a three-week low on Friday. U.S. factory output for February was reported up 0.8%, nearly erasing the blizzard-related drop of 0.9% in January. This should give the Fed cover for another taper of its bond and mortgage-backed security purchase program during the Open Market Committee meeting, which starts tomorrow.

Shanghai stocks were also up, rising almost 1% today, but the Nikkei and Hang Seng failed to join the party.  The Nikkei closed at a six-week low, and the Hang Seng closed at a five-week low.

The DXY dollar index is jerking back and forth this morning, up and back down to unchanged in volatile trading. The yen is lower, as safe haven demand fades, and the euro is hanging tough near recent highs despite the anticipation of an ECB rate cut. The big news on the forex front today is that the Peoples Bank of China has doubled the allowable daily trading range of the yuan, to 2% on either side of the daily “yuan fix” by the central bank. This comes after the central bank shook speculators out of the market by intervening to depreciate the currency, making it safer to widen the trading band. The yuan is trading at 11-month lows, thanks to the new “elbow room.”

Gold and silver are near unchanged from Friday’s close,  Platinum saw a healthy bid overnight, but has given most of it up and is trading slightly above unchanged. Palladium is near unchanged, down $2 an ounce.

Unless people start shooting each other in Ukraine, expect all attention to be shifted to speculation over the Fed’s policy meeting tomorrow and Wednesday. This is Janet Yellen’s first FOMC meeting in the driver’s seat, and market analysts will be pouring over every letter of the committee announcement Wednesday afternoon, as well as Yellen’s first press conference.

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News