A stronger dollar and lack of response so far by the West to Russia’s open invasion of Ukraine pushed gold through support levels at $1,273 in heavy volume.
Gold stair-stepped down throughout trading overnight, as the dollar hit a seven-month high against the yen and a one-year high against the euro. The DXY dollar index touched a 13-month high in midday European trading, briefly breaking the 83 mark.
The greenback is king of the currency hill, as the EU nations slide into recession, and even powerhouse Germany sees GDP contract. The French government called on the European Central Bank to weaken the euro even more, as French manufacturing activity plummeted. The ECB meets this Thursday, with the market fully expecting a quantitative easing (money printing) policy to be unveiled.
Silver saw a large, sudden selloff midday in London, and spent the rest of the day in Europe clawing back some of the loss. Platinum lost moderately overnight, while palladium lost its perch over the $900 mark to drop $20.
Yesterday in the Markets
U.S. markets were closed yesterday, leading to extremely thin volumes.
Economic News Affecting Gold
Wall St. opened split, with the Dow and S&P500 down and the NASDAQ up. The ISM Manufacturing Index for August surprised to the upside, reaching 59.0 from a 57.1 in July. Analysts had expected a miniscule drop. Employment in manufacturing, however, dropped slightly. Construction spending in the U.S. for July jumped 1.8%, to the highest level in 5 years. A large part of this was state and local governments working to repair and upgrade crumbling infrastructure.
In PGM news, annual earnings for Impala Platinum, one of the world’s largest platinum companies, fell by 74%, due to the five-month strike by mineworkers in South Africa. Production at Implats’ South African mines is still only at 65%, with a target of full production before the end of October. Anglo American Platinum has decided to nearly triple production at its one mine in Zimbabwe, even though the government seized money from its bank account, and forced the company to give 51% of the mine to the government. Amplats still considers the mine a better prospect than expanding its South African mines. The company plans on selling at least three of its mines in South Africa.
It isn’t just the central bank in China who is bullish on gold. Gold holdings of China’s largest commercial banks have exploded by 66% over last year. The banks lease the gold out in gold-backed loans, The four largest Chinese banks hold approximately 1,445 metric tons of gold between them.
Geopolitical News Affecting Gold
Ukraine’s army is suffering reverses in the face of Russian Army tank columns, abandoning a strategic airfield near the rebel city of Luhansk. The Ukrainian Army was on the cusp of crushing the rebellion, when Russian Army formations crossed the border and openly attacked in the southeast, to open a second front. Russian President Putin called for “statehood” for the provinces of Eastern Ukraine, with the presumed outcome of annexation by Russia, as was done to the Crimea. Putin also reportedly told the president of the European Commission, “If I want, I could take Kiev in two weeks.” So far, there have been nothing but words from the West in response to the open warfare being conducted by Russia against Ukraine, with sanctions being discussed this week.
Putin may be finally seeing some resistance on the home front, as the truth about Russian soldiers fighting in Ukraine leaks out. State-run media has repeatedly assured the citizens that there are no Russian troops in Ukraine, as a rebel commander told Western reporters that there were approximately 4,000 Russian Army troops in his area, who came to fight while “on vacation.” Russian rights activists are quoting reports that over 100 Russian soldiers died in one attack when the ammunition supply convoy they drove into Ukraine came under attack. Western media is showing photos and reporting that almost 500 people were arrested in mass protests over Russian soldiers being killing in Ukraine.
Wednesday should see some sort of news out of the NATO summit in Wales, as Russian forces gain more ground in Ukraine. Certainly, the Western powers have the anniversary of Hitler’s invasion of Poland in 1939, which happened 75 years ago yesterday, hanging over their heads.
In economic news, we’re looking at U.S. auto sales, and factory orders, PMI reports from several European countries, EU retail sales, and the important ADP private sector employment report in the U.S.