Base and precious metals followed global stocks downward as the Foreign Minister of China told reporters the market should not expect any further stimulus from the government. Asian stocks closed much lower, European stocks gave up a rally to slip into the red, and Wall St. opened lower.
Market indicators are showing that gold, and especially silver, are in oversold territory right now, but the slowing economy and risks of deflation in Europe are combining with evaporation of safe haven demand to help the market bears.
At 11:30 am, precious metals are off their overnight lows. Gold is down $2.10 (0.17%) to $1214.10. Silver is down five cents (0.28%) to $17.74. Platinum is down $6.00 (0.45%) to $1,327. Palladium is down $7.00 (0.87%) to $802.
Yesterday in the Markets
The dollar closed on Friday up notch its tenth straight week of gains. Tumblr and tech stocks pulled the NASDAQ down 0.30%, the S&P 500 closed down less than a point, and the Dow closed up less than 1/10 of a percent. The yield on the 10-year Treasury note ended higher, at 2.58%.
Gold lost $8.60, while silver dropped below the $18 mark to $17.79. Platinum was down $9.00 to $1.333, while palladium lost over 2% to close at $809.
Economic News Affecting Gold
In addition to the news from Beijing to not expect any more stimulus, existing home sales in the U.S. unexpectedly dropped 1.8%, putting fresh pressure on stocks. Homes sales have been driven in large part by hedge funds buying up homes to put on the market as rental properties, and that trend is ending.
European stocks were further hurt when it was announced that Tesco was suspending several top executives and launching an investigation into a possible fraudulent over-stating of profits.
Geopolitical News Affecting Gold
ISIS has greatly reduced activity in Iraq in the face of U.S. and French airstrikes, and are taking their anger out on Kurds in Syria. Using tanks stolen from the Iraqi and Syrian Armies, the terrorist group has launched a major offensive in Syria against Kurdish areas near the Turkish border, causing over 100,000 people to flee into Turkey. The Turkish government has been reported to have sealed the border crossings, as local humanitarian efforts are overwhelmed.
Ukrainian president Poroshenko has announced that conditions are de-escalating in the war against Russian-backed rebels in the eastern part of the country. While the ceasefire has technically been broken by fighting, Poroshenko announced “The number of casualties is ten times less than what we had before,” and so is willing to consider the ceasefire still in effect. The Ukrainian Army announced that it was pulling heavy armor and artillery out of the front lines, in an effort to further de-escalate the situation. The government in Kiev has voted to give amnesty to the rebels and greater autonomy to the region, if they lay down their arms and Russian soldiers in Ukraine return home.
Russian president Putin may have his own reasons for wanting to bring this situation to a close, as rallies are erupting in several Russian cities as word gets out of Russian soldiers dying in combat in Ukraine. Putin is probably worried more about the sinking Russian economy, though, as the majority of public opinion seems to still be behind him regarding Ukraine.
Bloomberg reports that the Russian ruble is at a record low, the central bank has cancelled nine bond auctions in a row (limiting the amount of cash the government has to operate on,) and consumer inflation has hit 7.6%, despite multiple increases in benchmark interest rates, due to the pressures of Western sanctions over the Russian seizure Crimea from Ukraine, and its supplying pro-Russian rebels in Ukraine.
Tomorrow brings PMI reports from France, Germany, and the EU as a whole, as well as French GDP. The U.S. sees retail sales, home prices, and the flash manufacturing PMI.