Gold was up modestly this morning as as Asian buyers stepped in to buy the recent multi-month low. It held steady in London trading, into the COMEX open.
Silver has shown a lot of volatility within a very tight range, signalling low volumes on the market. It was basically unchanged into the New York trading session. Platinum is just above unchanged, while palladium is slightly higher.
At 10am in New York, spot gold was up $6.20 to $1,234.50, silver was down two cents to $18.59, platinum was down a dollar to $1,362, and palladium was up $3 to $834. Crude oil futures hit a two-year low in early trading. a bearish sign for gold.
Chinese stocks are down as manufacturing output for the Middle Kingdom fell to the lowest level since the 2008 financial crisis. August output grew 6.9%, compared to 9.0% in July and an expected 8.8%. Japanese markets were closed for holiday today. European stocks had gained slightly on merger talk between the parent companies of Miller Beer and Budweiser, but fell after the release of factory data in the U.S.
U.S. factory output for August was reported at -0.4%, after rising 0.7% in July, due to plummeting car production. Automobile production was -7.6% after a 9.3% increase in July. This is the first decline in U.S. factory output since the “polar vortex” of January. Wall St. opened down, with the NASDAQ rapidly plunging over .8% as tech shares also fell. The report also dropped the morning dollar rally like a mallard during duck season, from 84.4 to under 84.2 on the DXY index.
Yesterday in the Markets
Friday was another bad day for gold, closing down $11.90 to &1,227.90. Silver lost 6 cents, platinum lost $4, but palladium gained $3. Stocks closed in the red again, and the dollar also lost slightly. The S&P 500 closed the week with a loss of 1.1%.
The yield on the 10-year Treasury note jumped to 2.61%, while the German 10-year bund yield increased to 1.08%. The UK, Italy, and even Spain are still paying less on their ten-year bonds than the U.S. is.
Economic News Affecting Gold
Vice Chairman of the Fed and hyperinflation expert Stanley Fisher is heading a new Fed task force to watch for financial instability and asset bubbles. Looking at the stock market and junk bond yields, I’d say they’re a little late.
We expect both Russian individuals and the government in Moscow to continue to buy gold, as the central bank has raised interest rates three times already this year to fight inflation caused by international sanctions. The ruble fell 2.5% last week to an all-time low, hitting an intraday low of 37.97 to the dollar. The climbing interest rates are choking an economy already struggling from the sanctions. Falling oil prices are also putting the squeeze on the Russian government, which gets fully half its revenues from oil and gas sales.
Russia is opening the largest platinum mine in Zimbabwe this week. Russian Foreign Minister Lavrov is in the Zimbabwean capital of Harare today, and will participate in the official opening of the mine.
Sibanye Gold is trying to lay off mineworkers to shut down an unprofitable mine in South Africa, but is encountering threats from the labor union and resistance from the government.
The Organization for Economic Cooperation and Development (OECD) is pressuring the European Central Bank to greatly expand its quantitative easing plans, as it cuts growth forecasts for much of the developed world. This of course will put even more pressure on the euro, which in turn will strengthen the dollar.
Geopolitical News Affecting Gold
The markets are watching the Thursday vote in Scotland over seceding from the United Kingdom. Should the vote by “yes,” the ramifications and disruptions across global markets could rival the collapse of Lehman Brothers in 2008.
The U.S. continues to line up support for international action against ISIS/Islamic State, including among Muslim nations. Turkey, although a NATO member, has refused to allow its airfields to be used to launch strikes against the terrorist quasi-nation that straddles eastern Syria and Western Iraq, since ISIS is positioned along long lengths of the Turkish border.
In related news, Israel has said it will take military action against ISIS if they attack neighboring Jordan.
This is a huge week for all markets, not just precious metals. The Federal Reserve Open Market Committee meets tomorrow and Wednesday, and Yellen will give a press conference Wednesday afternoon, after the meeting ends. The next day, Scotland votes for independence, and a new international gold market opens in Shanghai. The day after that is a “triple witching Friday,” when stock options, index options, and index futures all expire at the same time.
Since 1991, stocks have experienced a weekly drop 77% of the time, the week after the September triple witching Friday.
Tomorrow brings us the UK consumer price index and producer price index, the ZEW index of German economic sentiment, the final US PPI for August, and the Johnson Redbook chain store retail sales.