Durable goods orders in the US unexpectedly fell for a second month in September, after a jarring 18.3% drop in August. Orders for durable goods fell 1.3% last month, as companies continue to stuff inventories.
The report smashed a recovering dollar into negative territory, while spot gold jumped over $8 an ounce. The fall in the dollar is helping crude oil prices stabilize from recent falls.
Despite the news, stocks in New York opened higher and rose at the bell.
European stocks are up on strong earnings reports, reversing yesterday’s gains, as the Swedish central bank cuts benchmark interest rates to zero, and the ECB attempts to start a bond-buying program that will not run afoul of the EU monetary treaty.
Precious metals are up across the board this morning on the disappointing durable goods report.
Yesterday in the Markets
Wall St. closed mixed on Monday, with the S&P 500 down 2 points, and the Nasdaq up the same amount. The Dow gained 12.5 points. The 10-year Treasury note ended with the yield down 1 basis point to 2.26%, while the dollar closed just below unchanged.
Gold lost $5.90 to close at $1,225.10, while silver dropped a dime to end at $17.11. Both platinum and palladium were up slightly, to close at $1,252 and $781 respectively.
Economic News Affecting Gold
The Federal Reserve begins its policy meeting today, and will wrap up tomorrow at 2pm. Traders are hoping desperately that the Fed will take the deflation and recession gripping Europe into account in the release of forward guidance on policy, as this would keep interest rates near zero.
Crude oil prices, which have a substantial role in determining inflation, are using today’s weakened dollar to halt their slide. With West Texas Intermediate at $81/bbl, and Brent under $86, major oil exporting nations are feeling the squeeze. We could be on the verge of major social unrest or revolts in some countries, as the money to keep the population pacified dries up. Venezuela, which has been facing food riots for months, needs oil to sell for $121 a barrel to break even. Russia needs prices of $105 a barrel or more, or it loses money on each barrel produced. Iran is even worse off, needing oil prices at $140 a barrel, due to its outdated infrastructure.
Geopolitical News Affecting Gold
The US and allies continue to fly airstrikes over Syrian and Iraqi territory to bomb troops belonging to the Islamic State of Iraq and the Levant, but western media is more obsessed with Ebola and deflation lately to devote much attention to it.
Protests continue in Hong Kong, but again, the West isn’t paying much attention.
Despite the election of a pro-Western government in Ukraine on Sunday, Russian president Putin has been quiet, except for urging the West to help Ukraine pay its $4.5 billion debt for Russian natural gas that it has used.
The Federal Reserve Open Market Committee wraps up tomorrow afternoon, and markets will be frantically parsing its statement for clues on the timing of future interest rate hikes, Any big surprise on the dovish side, such as announced a delay in interest rate hikes, or a (highly unlikely) decision to continue the billions of dollars a month in bond buying, will shock the dollar and lift gold.