Dollar, Alibaba and the Quadruple Witches: Market Update Sept 19

September 19th, 2014 by

A stronger dollar and risk-on attitude in the marketplace ahead of the world’s biggest IPO has gold retesting January lows.

Gold traded in an tight range overnight, before heading lower in New York. Platinum was also down moderately, while silver and palladium saw substantial declines.

Noon spot prices in New York  were;
Gold $1,218.50 (-0.51%)
Silver $17.99 (-2.83%)
Platinum $1336 (-0.48%)
Palladium $811 (-1.93%)

The dollar hit a six-year high versus the yen, and a resurgent pound hit a two-year high versus the euro. The dollar seems to be extending its rally for another week. The yield on the 10-year T-note eased back to 2.59% as bonds saw some bidding action.

Wall St. opened up, but weakened towards noon in what will likely be an extremely exciting day.  Those rich and connected investors who got in on the Alibaba IPO last night will be able to flip their shares immediately today, instead of having the usual “time out” period that most IPOs have for initial investors.  In addition to frantic chasing of BABA shares, today is the quarterly “quadruple witching” day, when index options, index futures, stock options and individual stock futures expire. Holders of these instruments will have to close out or roll over their positions.

Small cap stocks are being hard hit, with rumors that investors are selling precious metals and other stocks to buy into the Alibaba bandwagon.

Yesterday in the Markets

Yesterday’s spot closed were
Gold $1,124.80 (+$1.60)
Silver $18.52 (even)
Platinum $1,342 (-$6.00)
Palladium $827 (-$3.00)

U.S. markets closed higher, with the Dow and S&P 500 both hitting records. The yield on the 10-year Treasury note ended at 2.61%

Economic News Affecting Gold

In addition to some traders selling everything they can to buy Albaba stock, today is a “quadruple witching day.” This occurs when stock index options, stock index futures, stock options, and individual stock futures all expire on the same day. Traders holding these must close out their positions, or roll them over into new contracts. This leads to a volatile day.

The Nikkei closed at a seven-year high on a weaker yen and the Alibaba IPO. Chinese shares also closed higher, while European stocks have shaken off the worries over France’s sovereign debt will likely be downgraded, choosing instead to feel happy over Scotland remaining in the UK. European indices hit a 6 year high before easing on options rollovers and close-outs in the witching hour.

Alibaba shares soared over 40% in late morning trading in New York.

A drop in leading economic indicators in the U.S. as well as lower housing starts may be contributing to Wall St. sinking into the afternoon.

Geopolitical News Affecting Gold

Scotland’s 55% to 45% decision to remain in the UK bolstered UK stocks as well as European stocks. There had been some safe haven buying of gold in Scotland and the UK ahead of the vote, but that, of course, has abated.

France has announced that it will be conducting airstrikes against the terrorist group ISIS in Iraq, but the news has not had any effect on markets.

Looking Ahead

 

 

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News