Gold Pauses on CPI, Housing Data: Morning Market Update Aug 19

August 19th, 2014 by

Gold eased back to unchanged from yesterday’s 1297 close after slight gains overnight, due to a lower than expected increase in the U.S. Consumer Price Index. The CPI for July rose only 0.1%, compared to 0.3% for June, easing fears in the stock market of an early hike in benchmark interest rates by the Federal Reserve.

Housing starts jumped 15.7% in July, to the highest level in six months, causing Home Depot to raise earnings forecasts. The dollar gained modestly on the news, as the euro declined.

Gold is trading in a narrow $5 range, sliding on economic news in New York, then attracting bargain hunters and physical demand overnight. Silver is trading unchanged today, in volatile action due to the light volumes that are normal for this time of year. Platinum is easing this morning after slight gains overnight, while palladium is inching upward over $890 again, perhaps for another run at the $900 mark. Palladium is up over 24% for the year, handily beating the stock market.

Expectations of big things out of the European Central Bank, as well as safe haven demand, has the yield on the 10-year German bund below 1% again today. In contrast, the 10-year U.S. Treasury note is yielding 2.37% (also down over the last week.)

European stocks are up on earnings, and a relaxation of tensions over Ukraine. Wall St is up on the fore-mentioned CPI and housing starts data. The Nikkei hit a two-week high as the yen weakened on easing of safe haven demand, and the Hang Seng in Hong Kong is near six-year highs as China loosens restrictions on foreign investment in the mainland. The government in Beijing has granted permission for three more banks to import gold, as it prepares to offer gold contracts in the Shanghai Gold Exchange. China is tired of being the world’s #1 gold producer AND the world’s #1 gold buyer, and having little to no say in the market price.

Israel-PalestineIn international news, militants broke the ceasefire in the Gaza Strip by launching rockets at Israel, prompting retaliatory strikes by the Israeli Army. Hundreds of Taliban fighters in Afghanistan attacked the capital of Kabul in their efforts to regain control of the country after being ousted by the U.S. for giving support to Osama bin Ladin. In other terrorist news, the Islamic State says that it has beaten off an Iraqi Army attempt to regain the city of Tikrit.

In Ukraine, efforts to retrieve the bodies from a refugee convoy that came under artillery attack near Luhansk yesterday have been suspended due to fighting breaking out in the area. The convoy was struck by artillery fire in an area where the pro-Russian rebels and government troops have been shelling one another. The government in Kiev claims it was a rebel attack, but rebel sources deny the charges.

The World Health Organization says the death toll of the ebola epidemic in western Africa has topped 1,200, and that it will take at least six months to get the deadly outbreak under control.

All the above lends some safe haven support for gold, as well as physical buyers stepping in when the price dips below $1,300.

looking-aheadTomorrow’s big economic news with be the release of the minutes from the Federal Reserve Open Market Committee (FOMC) meeting in July. There is no FOMC meeting for August. Of lesser import is mortgage applications and petroleum stockpile levels in the U.S., and Bank of England policy committee minutes.

Thursday, central bankers from around the world meet in Jackson Hole, Wyoming. Market watchers and traders will be intently watching and listening for any information (or slip of the lip) that will give a clue as to future central bank policy.

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News