European Central Bank president Mario Draghi caught currency markets by surprise this morning with the announcement that the ECB would begin purchases of bonds and asset-backed securities almost immediately, and would do so for at least two years.
Draghi refused to set a limit to the QE purchases when asked, leading speculators who had sold the euro short on expectations of a further drop scrambling to close out their positions.
The dollar, which was already trending in the red on profit taking, was hit on the sudden euro strength. The strong dollar and falling crude prices due to a global oil glut have been big factors in the recent pressure on precious metals.
Gold gained overnight in Asia, as the pro-democracy protests in Hong Kong show no signs of abating. Precious metals eased in European trading, as the ECB kept interest rates steady after recent cuts.
The 10am market numbers are:
Gold: $1212.70 down $0.30
Silver: $17.03 down $0.14
Platinum: $1,266 down $10.00
Palladium: $771 down $3.00
Stocks are mixed, with the Dow down 26 points, the S&P 500 flat, and the Nasdaq down 7.5 points. Airline stocks were hit hard on the news that an Ebola patient flew from Liberia to Belgium then to Washington DC before landing in Dallas, and was not detected, potentially infecting up to 80 people.
Yesterday in the Markets
Markets have been choppier this week, with mixed economic data in the U.S., bad economic data out of the EU, and uncertainty about future central bank policy on either side of the Atlantic. News that an Ebola patient had been roaming around Dallas for two days after being misdiagnosed and sent home by a local hospital added to the general unease people are feeling.
Gold greeted the COMEX open yesterday with very heavy volume, gaining to over $1215 before easing in late trading to end up $4.30. Silver gained 1.2% to close at $17.18, while platinum lost 1.39% to close at $1,276 and palladium gained .78% to close at $774.
Stocks were down sharply for another day. The Dow broke under its 50-day moving average, and the S&P 500 broke under its 100-day moving average. The small-cap Russell 2000 is down 10% from its high on March 4, officially putting it into a correction.
Economic News Affecting Gold
First-time jobless claims for last week came in 8,000 lower than the previous week, with 287,000 people losing their jobs. This helped to counter some indications yesterday of an economic slowdown, but the market is looking at good news as bad news, as the Fed may take away the “zero percent financing” for mergers and stock buybacks. The junk bond market is seeing heavier outflows, as the chances for higher interest rates in the near future grows. The junk bond market has ballooned to pre-2008 levels, and the Fed has announced that it will start actually enforcing guidelines against the banks originating these loans, instead of just wagging its finger and saying “you shouldn’t do that.”
News of the lackadaisical treatment of an Ebola patient in Dallas has locals fearful, and airline stocks dragging the Dow down. The infected man was returning from Liberia, where he was visiting family. He flew from Liberia, to Belgium, to Washington DC, to Dallas. Earlier this week, he was feeling ill with a fever, and went to the local hospital. Even after he told them he just got back from Liberia, they sent him home with some antibiotics. Two days later, he was vomiting on the street and was taken by ambulance back to the hospital and put in an isolation ward.
On the retail front, we hear that Gainesville Coins is not the only bullion business that’s been busy. The Royal Canadian Mint has announced that Silver Maple Leaf coins are now on allocation, as demand has kept above production abilities. On the other side of the globe, Australia’s Perth Mint has released its September sales figures, showing 68,781 troy oz of gold, and 756,839 troy oz of silver coins sold. The gold sales are the best in 11 months.
The sales figures from the U.S. Mint show that 58,000 troy oz of American Gold Eagles were sold in September, more than double the August sales of 25,000. American Silver Eagle sales totaled 4.14 million troy oz for September.
Geopolitical News Affecting Gold
Pro-democracy protests continue in Hong Kong, as the Beijing-backed leader of the island refuses demands from the crowds to step down. Police, which have mostly stood by unless the protests got unruly, have announced that any attempts by the protesters to occupy government buildings will not be tolerated.
Rebel attacks on the government-held airport in Donetsk, Ukraine are inflicting more casualties, after the Ukrainian Army announced that it was withdrawing tanks and heavy artillery in an attempt to defuse the situation.
The Turkish government is debating whether to join the coalition fighting the terrorist army of the Islamic State, as it fights to prevent Turkish Kurds from entering Syria to defend the Syrian Kurds, and tens of thousands of Syrian Kurds flee into Turkish Kurdistan. ISIS controls border areas with Turkey in both Syria and Iraq.
Perhaps the most important economic report tomorrow with be the official non-farm payrolls from the U.S. government. Last month, payrolls came in far below the ADP private sector payrolls report, leading to market volatility.
We’ll also see PMI numbers from Germany and France (the EU’s two largest economies) as well as composite PMI for the EU as a whole. EU retail sales numbers will also be released.
If more Ebola cases are found in the U.S., or it is found that the Dallas patient infected people in Belgium, expect a big reaction in the stock market.