Gold Bounces on Short Covering, Safe Haven: Morning Market Update Aug 26

August 26th, 2014 by

gold-rallyGold saw a sharp rebound over $1,290 in Asian trading overnight, as safe haven demand and profit-taking resulted in some covering of short positions. Silver gained modestly overnight, holding the gains into the New York open where it saw a short-term spike before easing slightly.

Platinum also gained modestly in Asia, showing some volatility due to the thin markets affecting all sectors during summer vacation.  Palladium, which briefly touched a $895 high yesterday before closing at $888, is trading near unchanged.

Thin volumes are affecting all markets — equities, commodities, metals. Nanex reported that the volume on the New York Stock Exchange yesterday was the lowest non-holiday volume since October 2006, so take any big movements in any market for the next week or so with a grain of salt.

Durable goods orders in the U.S. jumped an unprecedented 22.6% in July, but it’s all courtesy of large contracts for aircraft from Boeing. Stripping out transportation, durable goods actually fell 0.8%.

china-goldYou may have seen mainstream media reports of falling Chinese gold imports through Hong Kong. This is exactly what Beijing wants to be reported in Western media, to keep speculation low. China has started importing gold directly into Beijing and Shanghai, to avoid Western media from tracking its gold purchases, so of course imports are dropping in Hong Kong, where the business media can see the imports.

China is going full speed ahead with its strategy of insulating itself as much as possible from undue exposure to the U.S. dollar, while it builds economic alliances with its suppliers in Asia, the Middle East, and Africa. This includes bilateral agreements to conduct international trade in yuan, instead of using dollars to convert from yuan to the exporter’s currency and back. This not only protects China, it lessens the demand for dollars, weakening it.

Speaking of the dollar, traders in the greenback were taking profits today, snapping the recent rally. The dollar is holding on at around the 82.50 mark in the DXY dollar index. The euro is still near 11-month lows, much to the presumed delight of Mario Draghi and the European Central Bank, while safe haven demand strengthened the yen, causing the Nikkei stock index to close down.  The 10-year Treasury note yield is down to 2.37% on safe haven demand, while the German 10-year note is paying only 0.94%. Oil is still range-bound, despite military activity in the Middle East.

The secret of the “mystery jets” bombing rebel positions in Libya have been revealed. No, it’s not the U.S. this time, it’s Egypt and the United Arab Emirates! The U.S. is miffed because they weren’t clued in (allowed to run the operation,) but Arab nations taking care of the messes in their own back yards is exactly the sort of behavior that should be applauded by Washington.

Speaking of the U.S., airstrikes, and the Middle East, word has leaked out that surveillance flights are beginning over Syria, without Syrian permission, as the U.S. gets ready to bomb ISIS in eastern Syria. We are now seeing the U.S. helping the Assad government by bombing rebels fighting Syria, while supplying weapons to other rebels fighting Syria (who have those weapons taken from them by the rebels that the U.S. is bombing.)

In Europe, Russian president Putin and Ukrainian president Poroshenko are meeting in Kiev, Belarus, as news that the Ukrainian Army has captured Russian soldiers on its soil has hit the news services. Russia maintains the the paratrooper unit was patrolling the border in their armored personnel carriers when they accidentally crossed into Ukraine in an unmarked area.

Rebel tanks that have suddenly appeared in a section of the country near the coast deep in government territory are fighting near the town of Novoazovsk. The only way for the rebel armored column to have gotten there without being caught in transit is to have traveled through Russia.

Tomorrow is a fairly quiet day, economically, with mortgage applications and petroleum levels in the U.S. being reported.

 

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News