Wall St. opened in positive territory this morning, after experiencing the worst beat-down in months yesterday.
The dollar is reaching to regain a four-year high, and looks poised to post an 11th straight week of gains. This will be the longest rally in the dollar since it was decoupled from gold in 1971.
Gold saw support in Asia after getting a boost in New York yesterday, but reports that second quarter GDP in the U.S. was revised to +4.6% from 4.2% boosted the dollar, and depressed gold. Consumer confidence in the U.S. rose, while consumers in Germany became more gloomy.
Asian stocks closed lower overnight, catching the same cold U.S. stocks had yesterday, but European stocks rose, getting a lift from banks that will benefit from the European Central Bank’s quantitative easing program.
Yesterday in the Markets
Thursday was another big loss for stocks, with all indices falling sharply. This makes four bad days out of the last five for Wall St. The Dow lost 264 points to fall over 1.5%, the S&P 500 dropped under its 50 day moving average after shedding 32 points to end just under 1966, and the Nasdaq fell nearly 2%. Crude oil was mixed, with West Texas Intermediate down 36 cents, and Brent up 9 cents.
Treasuries were heavily bid yesterday, with biggest one-day gain in nearly three weeks. The yield on the 10-year T-note dropped 6 basis points. The dollar built slightly on its rally yesterday.
Gold was the only winner in the precious metals yesterday, gaining $5.30. Spot silver was down 18 cents to close at $17.50, and platinum was down slightly to close at $1309. The biggest loser Thursday was palladium, shedding $17 to close at $797.
Economic News Affecting Gold
The struggling European Union continues its attempt to claw its way into recovery, with ECB president Mario Draghi pledging to expand accommodative policies to outright bond purchases. The euro currency continues to languish at a 14-year low against the dollar, but cheaper money doesn’t seem to be helping exports as much as was hoped. Japan is forging ahead with a money printing operation that dwarfs anything the Fed attempted, which as devalued the yen to a large extent.
Since the U.S. is the only major economy that seems to be recovering, everyone is rushing into the dollar and Treasuries. As the dollar becomes even stronger, U.S. exports will suffer more, and imports will increase, driving up the trade deficit. A big part of the increase in GDP for the second quarter was exports, which will drop due to the strong dollar.
Asian markets and commodities were hit yesterday when the Chinese government revealed the results of its investigation of “phantom” supplies of iron and copper that were used to secure loans by businesses. A whopping $10 billion of fake invoices were discovered. The schemes were used to sneak foreign money into China for investment at a profit.
Geopolitical News Affecting Gold
The U.S. and France struck ISIS targets again last night. Only the U.S. is striking terrorist targets in Syria. The others are hitting targets in Iraqi territory, after being asked for assistance by the Iraqi government. The United Arab Emirates fighter pilots hitting ISIS were commanded by the UAE’s first female fighter pilot. Britain is voting on whether to join the coalition bombing ISIS targets, which also includes Saudi Arabia and Qatar.
Turkey may get drug into the fight against ISIS, as the terrorist group has lashed out against Syrian Kurds after their Iraqi cousins (with the help of U.S. airstrikes) stopped their conquest of northern Iraq. Over 100,000 Syrian Kurds have fled into Turkish Kurdistan this week, as ISIS conquers their towns and villages, and now ISIS artillery is landing in Turkish territory.