Precious metals continue their rally which began on Monday, as global stocks continue to sag under the weight of decreased economic production and threats of deflation. The U.S. and UK seem to be the only two major economies with a positive outlook lately.
Wall St popped at the open this morning, but promptly dove down, with all three major indices just below unchanged at 10am.
The dollar recovered in overnight trading, but has resumed yesterday’s porpoising over and under unchanged levels ahead of the release of the FOMC minutes at 2pm in Washington.
Spot prices in New York at 10am are:
Gold: $1218.90, up $10.60
Silver: $17.35, up $0.16
Platinum: $1269, up $13.00
Palladium: $792, up $9.00
China is back from a one-week holiday, helping boost physical gold demand in Asia as people are buying on the dip ahead of the holiday season in India.
Yesterday in the Markets
Stocks on Wall St. started Tuesday down around .50%, following Asian and European stocks down on more bad economic news out of Germany. After struggling all day, the major indices declined in afternoon trading to close down over 1.5%. The Dow lost 272 points for its second day of 250+ point losses.
The dollar saw its worst two-day skid against the yen in eight months, hitting a three-week low against the Japanese currency. This was after five weeks of solid gains, so a technical correction was due. The DXY index, which measures the dollar against a basket of the major currencies, lost .34% on Tuesday. Treasuries were well-bid as investors pulled out of equities, with the yield on the 10-year T-note dropping 8 basis points to 2.34%
Tuesday’s closing spot prices for precious metals saw gold up $1.50, silver down 16 cents, platinum up $15.00 and palladium up a by $23.00. The pause in the dollar rally is helping precious metals regain lost ground. Crude prices were down 1%, with West Texas Intermediate below $89 a barrel, and Brent crude under $92.
Economic News Affecting Gold
Lots of economic news is out today, perhaps the largest being the release of the September meeting minutes of the Federal Reserve Open Market Committee at 2pm. The IMF put a damper on the markets this morning, by noting that the European Union is the major drag on the world economy, and that EU banks are carrying double the number of bad loans as they were in 2009, in the immediate aftermath of the financial crisis. The IMF urges banks to go ahead and write off the non-performing loans in order to improve the financial health of the European market.
The European Central Bank wasn’t exactly a ray of sunshine this morning, either, stating that the near-zero inflation rates in the EU were very worrying. Chicago Federal Reserve president Charles Evans also hitched a ride on the downer train, by saying that the fall in the unemployment rate was overstating the health of the labor market since the low number is due in large part to millions of people giving up completely on finding a job. The labor participation rate is at its lowest level since Nixon was president.
In related news, the Bureau of Labor Statistics says that companies are leaving open job positions unfilled, and increasing the workload of existing employees. This is due to uncertainty over the near-term prospects of the economy.
The Russian Central Bank is burning through more of its foreign currency reserves for the third day in a row of market interventions, in an attempt to keep the ruble from collapsing. The central bank has been forced to ease the thresholds for intervention as currency-starved Russian companies bid up dollars and euros in order to conduct export business.
Geopolitical News Affecting Gold
Gold is seeing some safe haven demand, as violent protests in southeastern Turkey continue. The Kurdish population there are protesting the government’s decision to not intervene in Syria against ISIS, even as nearly a quarter million Syrian Kurds have fled into Turkish Kurdistan. Turkish Army troops are using water cannons to disperse protestors near the border, and are blocking people from crossing into Syria to fight ISIS, even as the terrorists are in the process of conquering a major town on the Syrian-Turkish border.
Turkey now has many hundreds of miles of border on ISIS-held territory in Syria and Iraq, and it would be impossible to guard all of the rugged terrain against terrorist infiltration. As a secular nation with a Muslim majority, Turkey holds a special place on ISIS’s list of people that they hate.
Another safe haven situation is in central Asia, where India is accusing Pakistan of firing mortars and other weapons at dozens of border outposts in Kashmir over the last few days. The Indian government threatens payback.
Despite the cease-fire in Ukraine, the UN announces that over 3,500 people have been killed in eastern Ukraine since mid-April.
The Ebola outbreak in Spain is worsening, as a third healthcare worker in Madrid who was involved with treating a Spanish priest who caught the disease in Africa, has become infected. This is the third case of Ebola being contracted in the Madrid hospital among that medical team, pointing to a breakdown in procedures designed to prevent the spread of the deadly virus.
In related news, it is now estimated that the treatment of the Liberian man who brought Ebola to Dallas will cost more than $500,000.
Watch for this volatile day in stocks and other markets to get crazy around 2:02pm Eastern time today, with the release of the FOMC minutes. The economic docket for tomorrow includes first-time jobless claims in the U.S. The Bank of England, which is probably the only other central bank on the verge of raising interest rates other than the Fed, releases a policy statement tomorrow.