Falling gasoline prices helped counteract spiraling food costs, as consumer prices in the US fell 0.2%. This is the first decline in consumer inflation in 16 months.
Precious metals are near-steady ahead of the 2pm policy statement from the Federal Reserve, and a 3pm press conference by Chairman Janet Yellen.
The dollar, which had been flat, dropped on the CPI report, but soon recovered to unchanged. European stocks are up on news of China’s new stimulus program, with the exception of the FTSC in the UK, which is flat ahead of tomorrow’s independence vote in Scotland. Indices in Shanghai and Hong Kong were up on the new stimulus plan, while the Nikkei closed slightly down on Fed policy worries.
Yesterday in the Markets
Spot gold closed up $2.20 at $1,234.90 yesterday. Silver was up three cents to $18.69, Platinum gained $3 to $1,361, and palladium grabbed $8 to close at $840.
Stocks got a late boost yesterday when the Fed’s “official leaker,” Jon Hilsenwrath, reported that the phrase “considerable time” will appear once again in today’s FOMC statement regarding the timing of the first interest rate hike. The news/rumor led to the Dow hitting an all-time intraday high before closing up 100 points. The S&P 500 was up nearly 15 points, and the NASDAQ was up nearly 34 points. The 10-year Treasury note closed flat, with yields remaining at 2.59%.
European stocks closed down over Scotland worries, before the Fed rumor was released. Brent crude was up 1.1% and West Texas Intermediate was up 2%, on rumors that OPEC was planning to cut production to support oil prices. Saudi Arabia has already cut production by 408,000 barrels a day, but Iran, Iraq, and Nigeria increased production.
Economic News Affecting Gold
The big news is the rumor that the Fed will include the phrase “considerable time” when mentioning the timetable for an interest rate increase. Wall St. has become fixated on those two words in the last week, desperate for hints on when zero interest rate policies will end. The rumor was started by Jon Hilsenrath of the Wall St. Journal, who is considered by many to be the “official leaker” of Fed policy when the Fed wants to give markets advance notice.
Stand by this afternoon to see what else the Fed says, and if Yellen says something she shouldn’t in her 3pm press conference.
China announced yesterday that it was extending 500 billion CNY ($81.5 billion) in loans to the nation’s five largest banks, to boost investment. Commodities, especially base metal like copper and iron, were lifted by the news.
This morning, the U.S. consumer price index for August was reported to have fallen by 0.2%. This is the first decline in 16 months, and is because of falling gasoline prices. Energy prices as a whole fell 2.6%, while food prices increased 0.2%. Beef prices jumped 4.2% in August, with no sign of abating. U.S. cattle herds are at their lowest levels since the 1950s, due to droughts in the West and feed prices.
Geopolitical News Affecting Gold
The geopolitical front is mostly quiet today, with the exception of the anticipation over the Scottish independence vote tomorrow. A “Yes” vote will mean very turbulent times for the UK and European markets as a whole, with France, Spain, and Belgium bracing for possible rises in calls for independence in troublesome regions of their own.
Tomorrow, we have retail sales and industrial trends in the UK (likely to be lost in the brouhaha over the Scottish vote,) and first-time jobless claims and housing starts in the U.S.
The big news of course is the Scottish independence vote.