Signs that the European Common Market is sinking into deflation and recession increased this morning, as German GDP for the second quarter was reported to have contracted by 0.2%. French GDP and overall EU GDP both came in at unchanged. Italy has already fallen into recession.
Gold saw slightly higher demand on the news, but most of the immediate safe haven action went into European bonds, sending yields to record lows. The yield on German 10-year bund dropped below 1% before recovering to 1.01%. The French 10-year bond yield dropped to 1.41%, and the Spanish 10-year yield (despite all their troubles) is roughly even with U.S. 10-year T-notes at 2.42%. The euro is near 9-month lows, and the British pound is at four-month lows.
In New York, gold recovered from slight losses late in Europe to spike from $1,310 to $1,318 on news that first-time jobless claims in the U.S. came in far higher than expected. It retraced about half that spike, and at 10am EDT is trading up $2 from yesterday’s New York close, at $1.314.
Silver was up and down in a very tight range overnight, but is stair-stepping up this morning in New York, up 8 cents to $19.89. Platinum has traded in a super-tight $5 range in Europe and Asia for most of the week, but saw slight softness in late European trading today. It is up and down in a narrow channel this morning in New York, trading down $1 from Wednesday’s $1,463 close. Palladium has also been trading in a very tight range, but is seeing demand in New York this morning, possibly on the worry of further sanctions against Russia over Ukraine. Palladium is up $6 from yesterday’s spot close, at $882.
First-time jobless claims for last week jumped 21,000, as more people than expected were shown the door. This was far higher than the 5,000 increase analysts expected. A total of 311,000 new people filed for unemployment last week. The dollar, which had been steady just above unchanged, dropped on the news, and gold jumped $8 an ounce.
On the international front, some good news, some not-so-good news, and some worrying news. In good news, Israel and Hamas are negotiating to extend the ceasefire in Gaza by five days. Egyptian-brokered talks are taking place in Cairo.
In the not-so-good news, incumbent prime minister Maliki in Iraq has sworn to never step step down even after his own political party has abandoned him. Iraq’s leading Shiite cleric, Grand Ayatollah Ali al-Sistani, has called on all Shiites to unify behind the new prime minister-designate Abadi. Maliki, whose policies of repressing the Sunnis in northern Iraq are blamed in large part for the success of the terrorist army ISIS carving a new nation out of the area, has lost all international and domestic supporters, except a few diehards in his own party who agree with his policies.
In the “worrying news” category is reports that the Russian convoy of 280 trucks headed to eastern Ukraine with what Moscow terms humanitarian aid, has changed course and is headed to rebel-controlled border crossings on the Ukrainian-Russian border. The Ukrainian government had said that the aid convoy is not sponsored by the International Red Cross, and no one but Moscow knows what is really in the trucks. Kiev said that the aid would have to be unloaded and inspected at the Ukrainian border before being allowed into the country, a condition that Putin has apparently rejected. Pro-Russian rebels have been supplied with advanced weaponry by Moscow, including T64 main battle tanks, artillery, and anti-air missiles.
Tomorrow, the big economic news is the US “final demand” Producer Price Index and Industrial Output reports. Notice that were are seeing the volatility in the smaller precious metals investment markets that is usual for this time of year. Stocks are seeing much of the same problem. If you see a good deal (such as random date Silver Maple Leafs and Silver Eagles below wholesale price), you may want to jump on it, but don’t worry too much about day-to-day price movements for the next couple of weeks yet.