Gold Steady, Stocks Ignore Gaza, Ukraine: Morning Market Update July 23

July 23rd, 2014 by

Precious metals are steady this morning in New York, as the dollar hangs on to yesterday’s gains and stocks are mostly in the green.

Yesterday’s closing spot prices saw gold at $1.307, silver at $20.97, platinum at $1,482, and palladium at $870.

At 10am in New York gold was $1,308, silver $20.98, platinum $1,481, and palladium $871. Gold is seeing support in the $1,304 area, which is the 100-day moving average (100 DMA). Although safe haven demand has eased somewhat, it is still providing support for gold against a recently stronger dollar.  The dollar broke through resistance yesterday at 80.5, and is consolidating in the 80.7-80.8 range.

Switzerland reports that Russian palladium exports dropped 90% in June, to 6,500 ounces. Exports for April had been 69,400, and 49,300 in May. This was seen as a Russian move to bolster cash reserves in case of sanctions over its palladiumactivities in supporting Ukrainian rebels, and seizing the Ukrainian province of Crimea.

Russian palladium exports have been just mere shadows of the volume it used to sell just a few years ago, seen as evidence by some that the government has exhausted their Soviet-era strategic palladium stockpile.

On the flip side of the palladium market equation, demand is expected to outstrip supply again this year, especially as China’s palladium imports grow. China has seen increasing palladium demand, as more Chinese reach the level of affluence to be able to afford a car, and the government is on a campaign to get old, polluting cars off the road to improve the smog problem in major cities. Smog is so bad in China, that people literally die from it.

empty-gold-mine-cartOn the platinum front, the world’s leading platinum company, Anglo American Platinum (Amplats) has put up for sale several mines in the Rustenberg area. These mines represent 1/3 of Amplats’ total production, but the company wants to focus on newer mines that have lower expenses.

South African labor unions are of course cutting a fit, as any sale would obviously mean lay-offs to bring the mines back to profitability. Any sale or layoffs would have to be approved by the South African government as well. It is unclear if any of the other big mining companies are willing to step into such a mess, given the history of violence that accompanies labor action in South Africa.

Stocks are once again showing a disregard over geopolitical tensions, even as pro-Russian rebels in East Ukraine shoot down two fighter jets neat where Malaysian airliner MH17 was brought down, and a Hamas rocket pierced Israel’s “Iron Dome” missile defense and hit less than a mile from Tel Aviv airport.

Israel-PalestineThe latter event caused several European and American airlines to immediately suspend flights to Tel Aviv, prompting an angry response from the Israeli government, who insisted the airport is safe. Whether it is safe or not, no airline is willing to risk becoming the next MH17.

Israel continues it’s house to house fighting against Hamas in the Gaza Strip, rooting out more caches of rockets. Some have been found in tunnels underneath schools, as Hamas used children as human shields against Israeli airstrikes.

Economic crisis in China has been averted by a mysterious benefactor, as the first public bond default in Chinese history has been averted. Someone gave Huatong Road & Bridge group enough money to pay their 1-year bond that came due today. Most market watchers aren’t the least bit surprised, as it was assumed the local or provincial government would step in behind the scenes to rescue the company. Huatong is in this trouble in large part because those local and provincial governments have not paid the company for building, road, and infrastructure work it has done.

factoryWe’re solidly in the summer doldrums now, despite all the people shooting at each other. Watch for daily headlines to affect the markets, but only temporarily.  Tomorrow, we have a bunch of PMI reports due, which could be market movers: Chinese Flash manufacturing PMI, French/German/EU composite PMI, and the US first-time jobless claims report.

Since the Fed has decided that the employment picture will be the main driving force behind when benchmark interest rates rise, there will be close attention paid to this number. US new home sales are also reported tomorrow, so there’s a lot of info coming up that might move the markets.

 

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News