U.S. markets have decided that it’s better to take the middle road over the long Labor Day weekend, than be short or long on anything. Stocks, bonds and precious metals are all easing in early New York trading.
NATO isn’t going to risk global thermonuclear war over a non-member (Ukraine,) something that everyone is well aware of. Sanctions will be discussed over the weekend while the Russian Army pushes as far as it can into eastern Ukraine, hoping to open a land corridor to the Crimean peninsula, which it seized from Ukraine this spring.
At 10am, gold is down 3.60 at $1,285.60, silver is up 4 cents to $19,52, platinum is down $1 to $1,418, and palladium up $1 to $896. Palladium hit a high of $903 yesterday, Precious metals are resuming their extremely tight range again today, as a wedge pattern of higher lows and lower highs building in gold. With September being a traditionally good month for gold, we may see a breakout later in the month that is not dependent on wars breaking out.
The dollar is trading near unchanged, and the euro saw slight strength overnight. Russia’s actual invasion of Ukraine is naturally affecting European markets more than U.S. markets, but bond demand is easing even in Europe. Everyone is moving to neutral positions in all assets until Tuesday. The Labor Day holiday in the U.S. will be over, and the EU will have had 4 days to try to agree on a response to Russian aggression. (I wonder if France is still going to deliver that helicopter aircraft carrier they built for Putin?)
Yesterday in the Markets
Spot gold closed Thursday at $1,288.50, up .51% but near the session low. Silver closed at the session low of $19.40, but was still up .23% on the day. Platinum also closed near a session low, at $1,419, but gained .35%, and palladium closed at $895, after hitting a high of $903, gaining .90%. The $903 mark seems to be resistance for palladium, as it has hit that mark twice this week in intraday trading before easing into the close.
Oil hit a one-week high, and European stocks were giddy with the thought that any further sanctions against Russia would force the hand of the ECB and it would begin Fed-style quantitative easing. Wall St. finished Thursday on a down note.
Economic News Affecting Gold
Final consumer sentiment numbers for August in the U.S. came in at 82.5, slightly up from July’s 81.8. This was slightly better than analysts’ expectations, but caused only a momentary blip in the markets. Consumer spending in the U.S. for July surprised to the downside, dropping 0.1%, compared to a gain of 0.4% in June. The drop was blamed on stagnant wages unable to keep up with inflation, especially in food.
Composite EU inflation, while far lower than desired, came in as expected, decreasing bets of immediate ECB quantitative easing. Italy, however, has sunk into a deflationary spiral, similar to Greece. Since they are on the common euro currency, they cannot devalue in order to stop the cycle.
The Russian ruble and stock markets are collapsing, which is being blamed on Western aggression in their media. Russians are famous for accepting hardship and adversity when their patriotism is called upon, and Putin has successfully cracked down on dissidents, but the situation in Russia may come down to how quickly he can achieve his objectives in Ukraine. This may have been a factor in opening sending advanced Russian Army tanks and self-propelled artillery into Ukraine and opening a second front in the war.
Bloomberg is reporting that the Russian-based hack of JP Morgan’s databanks lasted for months, as the hackers stole customer account data. Other banks were also targeted. A previous Russian cyber-attack at NASDAQ in 2011 installed digital “booby traps” that could have wiped out the American stock market. Two more reasons to keep some of your assets in physical precious metals, outside of the banking system.
Geopolitical News Affecting Gold
Not only is Russia continuing its military attacks in southeastern Ukraine, it is attempting to intimidate its northern neighbors. Russian Air Force planes have deliberately violated Finnish airspace several times this week, and have ignored Finnish air traffic demands to leave. Moscow refused to give any explanation. Russian aircraft also violated Latvian airspace twice yesterday. Latvia is a NATO member, while Finland, who is not a member, has signed military cooperation agreements with the alliance.
European diplomats are meeting today and over the weekend to discuss a non-military response to the Russian invasion of Ukraine, ever mindful that, if pushed too far, Russia will turn off the natural gas pipeline that Europe is addicted to and let them all freeze this winter. Putin has far more leverage against Germany than the Arabs did over the United States during the oil embargo of the 1970s.
Ukraine is pleading for membership in NATO today, but there is absolutely zero chance of that happening. It would require the U.S. and Europe to immediately commit their army, navy and air forces into direct conflict with Russia, which would ignite World War III. Putin has successfully prevented his people from learning of Russian army deaths in Ukraine, but time may be running out before public opinion turns against him.
African mining operations continue to shut down as the largest ebola epidemic in history grows. Senegal is the fifth African nation to be hit by the deadly virus, and the World Health Organization estimates there will be 20,000 deaths before the ebola outbreak can be brought under control. Riots are reported in Guinea, as people attacked a local hospital and blamed the doctors for spreading the disease.
If you thought market volumes have been low lately, just wait until Monday. U.S. markets are closed for the Labor Day holiday, which should dry volume up drastically. This will increase volatility even more, as buyers look for sellers, and vice versa. The good news is, everyone should be back from vacation next week, and we enter the fall wedding and festival season in India. This will be a boost to precious metals.
European purchasing manager indices will be released Monday, with the U.S. following suit on Tuesday. Chinese PMI numbers will be released tomorrow.
Have a safe and happy Labor Day weekend, and hopefully the world won’t be on fire when we return on Tuesday!