Gold Near 4-Year Lows on BoJ QE: Morning Market Update Nov 3

November 3rd, 2014 by

Gold is trading near four-year lows this morning after breaking under the triple bottom established around the $1,185 level. After an initial dip on the Asia open, it has been trading in a tight range on the either side of the $1,170 mark.

Silver is modestly lower this morning, hovering above $16.00. It fell on the Asia open, but recovered some of the loss in London.

Platinum also dropped in Asian trading, but caught a rally in Europe to trade slightly higher in New York. Palladium opened steady overnight, gaining slightly in Europe to open slightly higher in New York.

The Nasdaq led the markets on the Monday open in New York, with the S&P 500 flat and the Dow down. Markets are volatile this morning, as the market digests the big gains from the last couple of days.

Yesterday in the Markets

Friday was all about the Benjamins, as the dollar closed just under 87 on the DXY index. Wall St was up over 1% while gold took a beating, dropping nearly $26 an ounce. Silver was down 1.73%, while platinum was down moderately, losing $8.00. Palladium was the lone bright spot, recovering $15.00 to $791.00. Treasuries eased on a very “risk on” day, with the yield on the 10-year T-note rising two basis points to 2.33%.

Friday’s Closing Prices

 Dow 17,390.52+195.10+1.13%
 S&P 500 2,018.05+23.40+1.17%
 Nasdaq 4630.74+64.60+1.41%
 DXY86.914+0.7670 +0.89%
 Gold $1172.90 -$25.90 -2.16%
 Silver $16.18 -$0.28 -1.73%
 Platinum $1232 -$8.00 -0.65%
 Palladium $791 +$15.00 +1.93%

Economic News Affecting Gold

super dollarThe big news for gold is the strong dollar running rampant over just about every other currency on the planet. The Bank of Japan’s surprise announcement that it was enlarging what is already the world’s biggest stimulus program put an arrow through the yen, which was one of the few currencies that could compete against the greenback. The dollar broke the 113 level against the yen overnight, the first time in seven years the Japanese currency has been this weak against the dollar. The dollar is trading this morning near four-year highs.

European shares are down after big gains Friday, as PMI numbers miss slightly in Germany, and for the EU as a whole. French manufacturing slightly beat expectations, with a gain to 48.8 from 48.5 in September, but is still below the reading of 50.0 that signifies growth. Germany edged back above that 50 mark with a reading of 51.4, up 1.5 points.

Asian stocks were down, as the Chinese PMI came in at 50.8, down from the 51.1 reported last month.

In the US, PMI dropped to 55.9 from 57.5 in September, while the ISM manufacturing index came in well above expectations, at 59.0. Analysts were expecting a small drop from last month, to 56.0. Construction spending unexpectedly dropped again in October, down 0.4% after dropping 0.8% in September, Analysts were expecting a big rebound to a +0.8.

Speaking of analysts, the ones at JP Morgan are in the news, with their estimate that the Fed’s “money printing,” aka quantitative easing, pumped up the stock markets to the tune of being responsible for 32% of the S&P 500’s current level. With the S&P breaking 2,000 on Friday, that means it would be at 1,360 had the Fed not bought those trillions of dollars worth of bundled toxic mortgages and bonds from JP Morgan and the other Big Banks.


On the subject of Big Banks, HSBC revealed that it is setting aside $1.8 billion to pay estimated penalties resulting from its manipulation of the international currency markets.

MF Global, or what is left of the bankrupt corporation, was found guilty of manipulating platinum and palladium markets, and has been order by the courts to pay plaintiffs $21.1 million. This is in addition to $5.25 million from MF Global’s insurance company. Hedge fund Moore Capital Management, which was part of the scheme, has already paid $57.4 million to plaintiffs. MF Global has already paid $25 million in penalties to the Commodity Futures Trading Commission for manipulation of the PGM markets.

Import records show that India imported 808 metric tonnes of silver in September. That’s nearly 26 million troy oz of silver! The total silver imports by India so far in 2014 are 4,291 metric tonnes.

empty-gold-mine-cartOn the gold production front. Harmony Gold, the third-largest gold producer in South Africa, is closing its largest gold mine for two weeks to flush out illegal miners who have snuck into the tunnels. 105 illegal miners were caught this month alone, and an untold number are hiding in side tunnels. The gold thieves stay underground for months at a time, paying legitimate employees to sneak them down the shaft, and supply them with food and water.  According to the South African Chamber of Mines, between 5% and 10% of all gold mined in South Africa comes from these thieves.

Geopolitical News Affecting Gold

There’s lots of unrest around the globe today, but none having an immediate impact on gold prices. The rebels in eastern Ukraine held elections on Sunday to establish their own governments, a move condemned by the West, and “respected” by Russia. Notably, Russia stopped short of officially recognizing the independence of the regions.

Pro-democracy protesters in Hong Kong plan to kick it up an notch, and take their demonstrations on the road to Beijing. Smart money says that they are going to have a bad time.

terroristTensions are really heating up on the border between Pakistan and India, with a suicide bomber blowing up the Pakistani side of the major border crossing between the two nations, killing at least 55, and injuring at least 126. This comes after machinegun fire and artillery attacks by both sides at the border in the province of Kashmir.

Looking Ahead

confusedOn the economic front, the trade balance report in the US comes out tomorrow. Exports will certainly take a hit next month, if they haven’t this time, due to the super-strong dollar. Factory orders and retail store sales are also on tap.

On the political front, it’s election day in the US! We may see turmoil in the markets Wednesday, depending on who controls the Senate in the next Congress, and if there is a Tea Party-led fight to dethrone Boehner as Speaker of the House.


by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News