News that regular Russian Army troops have invaded eastern Ukraine have sent global stocks plummeting, and investors rushing into safe haven assets. NATO confirms that at least 1,000 soldiers of the Russian Army, backed by tanks, artillery, and advanced anti-aircraft missile batteries have begun an offensive in Ukraine.
Gold gained steadily overnight, until a blip upward at the New York open broke the $1295 level and triggered a tiny bit of profit-taking. Silver saw a big rally in Asia of about 40 cents, before easing slightly. Platinum broke out of an unbelievably tight rang it has held for days, late in Asian trading. to gain $10 an ounce. Palladium continues its measured gains, up six dollars in New York.
10am spot prices are gold: $1,291 (+.65%), silver $19.63 (+1.0%), platinum $1,432 (+.78%), and palladium $894 (+.79%)
German bond yields are seeing record lows as money flees the stock market. The yen and Swiss franc are seeing safe haven buying as well, while the dollar recovers from an overnight drop. The Russian ruble has plummeted to a six-month low, as stocks in Moscow lose over 3%.
Yesterday in the Markets
The Dow and S&P 500 posted new records on light volume yesterday. Gold closed up $3, silver closed up 16 cents, platinum gained $6, and palladium rose $5. Bonds continued to see heavy demand.
Economic News Affecting Gold
Second quarter GDP in the U.S. was revised upward 0.2% to a final number of 4.2%. First-time jobless claims were reported at 298,000 for the second week in a row, though that number was revised upward a tiny 1,000 for the previous week. German unemployment held steady at 6.7%, while consumer prices held steady. EU economic sentiment eased about 1 point to 100.6 (a number guaranteed to drop over today’s events in Ukraine.)
Major platinum mining company Lonmin is struggling to restructure, after losing $600 million in revenue due to the five-month long platinum miners’ strike in South Africa. Any attempts at layoffs will be met by more strikes, and possible action by the South African government, which may doom the company. The question the African National Congress needs to ask itself is, “Do you really think someone else is going to swoop in and take over these mines and keep these people employed, given current economic conditions in South Africa?” The government and the mineworkers unions have refused suggestions that they take over troubled mines.
Geopolitical News Affecting Gold
Ukraine. Events have taken a big turn for the worse, as Putin apparently decided after meeting with Ukrainian president Poroshenko that he could push him around. Over 1,000 regular Russian Army troops, backed by better tanks than the Ukrainian Army possesses, as well as advanced anti-aircraft missile batteries, are attempting to open a supply line between the Russian border and the rebel-held city of Donetsk, as well as capturing the town of Novoazovsk on the coastline of the Sea of Asov, far from any rebel positions. Opening this second front by openly using Russian troops serves several purposes: forcing the Ukrainian Army to respond to the invasion, reducing pressure on the sieges of Donetsk and Luhansk; starting the process of opening an land route to the Russian-seized province of Crimea (and blocking Ukraine from oil and natural gas fields in the Sea of Azov); and sending a message to the Ukrainian government that Putin is unafraid of Western responses, and will use naked force to get what he believes are objectives in the Russian national interest.
Putin, an ex-KGB colonel, may have been encouraged by memories of past successes by the Soviet Union in invading Hungary and Czechoslovakia to put down anti-Russian revolts, and believes that the West will sit by once again instead of risking war.
Today’s events blow any plans traders had for a quiet lead-in to the Labor Day holiday right out of the water. That said, U.S. personal income outlays and expenditures, and consumer sentiment will be released tomorrow. Japanese CPI, unemployment, and industrial spending are reported tonight.