Gold met broad selling pressure after international tensions eased overnight, pushing through recent support at $1.305.
The unusual summertime gold rally has been purely driven by geopolitical risks, which couldn’t last forever. A breakout was also likely because of the extremely tight trading ranges precious metals have seen recently. Given the lack of economic impetus that is normal for this time of year, gold chose the easy way out by moving lower.
Markets for all of the Big Four precious metals dropped at 8am, as a large number of sell orders in thin overall volumes sent the price through sell stops (automatic orders to sell if the price drops below a certain price.)
What seemed to be a surprise escalation of hostilities by Russia against Ukraine last night turned around this morning. Reporters accompanying the Russian humanitarian aid convoy followed the nearly 280 trucks as they changed course away from a Ukrainian-controlled border crossing and headed to rebel-controlled areas. Reporters for the Guardian newspaper saw 23 Russian armored personnel carriers and support vehicles cross into Ukraine after dark through a hole in the barbed wire fence, entering rebel territory.
This blatant move by Russian Army vehicles in front of Western reporters may have just been intended to send a signal to Kiev, because this morning, rumors are swirling that Putin has suddenly agreed to let Ukrainian border police inspect the convoy, and agreed that the Red Cross would oversee the actual delivery to the needy in the Luhansk region of eastern Ukraine. The Red Cross this morning said that concerns for the safety of their workers has not yet been assured, and will not commit to the operation until that is resolved.
In Iraq, Prime Minister Maliki has finally agreed to step down and allow a new government to be formed, that will hopefully reduce some of the sectarian violence and political paralysis that has gripped the nation since April. Israeli and Palestinian negotiators are still hard at work in Cairo, continuing with “difficult” Egyptian-sponsored peace talks.
Combine all this with the perceived “bargains” in the stock market after recent losses, and stocks are up this morning. Wall St. is being helped by the news that producer prices only rose 0.1% in July, due to a plunge in gasoline prices.
The dollar began dropping slightly late in European trading, after holding steady overnight. The euro was up slightly.
Today marks the start of the new silver “don’t call it a fix” benchmark system, run by the CME Group and Thomson Reuters. Despite going live today, the process, and who exactly is involved, is still shrouded in secrecy. Earlier this week a Standard Bank spokesman said that advanced opinions of the process by those involved in testing it were “spectacularly uncomplimentary” and needlessly complex. The plans to charge people for access to the data isn’t endearing Thomson Reuters to anyone, either.
There’s no big economic news due Monday, so corporate earnings and geopolitical events will drive the markets to start the week. Tuesday we see US Consumer Price Index and Housing Starts, and both CPI and PPI for the UK.
Have a happy and safe weekend, and enjoy the end of summer, like so many traders are doing.