Gold and silver both dropped at the start of this week’s trading on some profit-taking, but recovered to near-unchanged in Asia.
The platinum group metals gained in Asia, but platinum had eased to just above unchanged in early New York trading. Palladium is modestly higher, riding a late European bounce into New York trading.
Economic News Affecting Gold
The economic news this morning is coming out of Europe, where 25 banks failed the European Central Bank’s “stress test” to see if they were healthy enough to survive another 2008-style financial crisis. Among those 25, 18 had already started a remediation plan, and we are assured that things are “much better than expected.” The largest bank in Cyprus, and the three largest banks in Greece were among the failing banks.
Another downbeat economic report in Germany had EU stocks giving up their early gains. The German IFO business sentiment index dropped for the sixth month, to a 22-month low.
Wall St will be driving the tone today, as 13 companies on the S&P 500 report earnings. Investors will probably be hunkering down ahead of this week’s Federal Reserve Open Market Committee meeting, which starts tomorrow. The FOMC is scheduled to end their bond-buying (aka “money printing”) program this month. Some investors are hoping that the Fed changes its mind, due to the worsening situation in Europe. If the Fed follows through with plans, the era of cheap leveraged buyouts be soon be coming to a close.
Oil prices continue to fall this morning, with West Texas Intermediate below $80 a barrel, and Brent crude under $85 a barrel. The effect at the pump is a good one for a change, with the national average for premium unleaded gas at $3.089. Oil producing countries that depend on high prices continue to feel the pain of basing budgets on crude prices of over $100/bbl.
Geopolitical News Affecting Gold
The latest poll from Switzerland over the November 30 gold referendum shows proponents with 44% of the vote. The measure, if passed, would require the Swiss National Bank to hold 20% of its reserves in gold and deny the bank the ability to sell the gold (effectively making it useless.) While their hearts are certainly in the right place as far as we’re concerned, the measure should have been more carefully thought out.
The big news tomorrow and Wednesday is of course, the FOMC meeting. This will be the last FOMC meeting until December, and there will be no Yellen press conference afterwards. Traders addicted to the years of easy money courtesy of the Fed are hoping that, with no press conference to explain the end of QE, it won’t happen. There’s a lot of straw-grasping on Wall St., with many also hoping that the Fed goes back on its promise that economic conditions overseas are not part of its mandate.
US Durable Goods order, the Case-Shiller home price index, and US consumer confidence will give the markets plenty of things to react (or overreact) to while we wait on Wednesday’s FOMC policy update.