Gold is steady this morning, as a possible war in Europe is less frightening to the markets than what may happen in the Federal Reserve Open Market Committee (FOMC) meeting which starts tomorrow. Silver is down moderately, while platinum is flat after giving up overnight gains. Palladium prices were steady overnight.
Markets shouldn’t take their eyes off Ukraine, though, as an assassination attempt on the pro-Russian mayor of Kharkiv, the nation’s second-largest city, almost succeeded. They mayor was shot in the back while riding a bicycle, by someone hiding in nearby woods. In the meantime, pro-Russian separatists in eastern Ukraine still hold hostage seven unarmed international observers, and the U.S. this morning announced new sanctions against Russian individuals and companies seen to have close ties to Russian president Vladimir Putin.
The dollar once again is weaker, seeing a sharp drop in European trading as investors dump greenbacks on news of violence in Ukraine. The weakness in the dollar is making the euro stronger. The strength in the euro is causing headaches for the European Central Bank, as a strong currency means lower inflation. While normally a good thing, economic activity is still somewhat slow in the EU, so a stronger euro means lower prices across the board, threatening to drop into deflation.
Today’s economic calendar is light, except for pending home sales for March at 10am ET. Pending home sales dropped 0.8% in February, but the bad numbers were blamed on bad winter weather. Analysts expect a gain of 0.6% in today’s report. Results that are too far from expectations could move the markets.
Wall St futures are up ahead of the bell, driven by merger and acquisition talk rather than earnings. US stocks are hoping to recover from a bad Friday. Euro stocks are also being supported by M&A talk, while Asian stocks are down. The Nikkei is being hurt as the weaker dollar means a stronger yen, hindering exporters. The yen is also seeing safe haven demand over Ukraine. Hong Kong shares slipped over fears that new internet censorship laws in mainland China could damage tech stocks.
Today will probably be a “risk off” day, as a market already skittish over Ukraine violence and new anti-Russian sanctions by the US look ahead to the FOMC meeting tomorrow and Wednesday. The Ukraine situation is bullish for gold, but precious metals have been allergic to the FOMC meetings since tapering of the Fed’s money printing began.