Spot gold is up modestly on a correction this morning, after holding in a tight range overnight. Gold was smashed yesterday, dropping $28.20. Silver traded in a tight range overnight near yesterday’s lows, but is up nearly 1% in New York. Platinum was hit by heavy selling in early COMEX trading, but has also recovered to slightly above unchanged. Palladium is just below unchanged after a quick recovery from an impulse downward at the same time.
First-time jobless claims came in better than expected this morning, pulling the dollar up briskly from under yesterday’s close. West Texas Intermediate crude is down over a dollar, with Brent down 50 cents. This reverses gains made yesterday on rumors of an explosion at a Saudi Arabian oil pipeline in the eastern part of the country. Since this came two days after a militant attack on Shiite Saudi citizens that killed at least five people, it was feared that the pipeline incident was retribution.
Yesterday in the Markets
Precious metals were hit hard yesterday, as the big gains by Republicans in mid-term elections in the US boosted the stock market and stocks in the energy and financial sectors. Wall St anticipates a relaxation of restrictions on businesses, as well as approval for the Keystone XL and other pipelines. Incoming Senate Majority Leader Mitch McConnell made a point of mentioning the goal of weakening the Dodd-Frank law that was passed after the financial crisis, in an effort to reign in risky behavior by “too big to fail” banks. McConnell also promised “no shutdown, no default” when it comes to the government’s budget, much to the approval of the markets.
Gold plunged $28 to close at $1,140, while silver was down 4.46% to $15.32. Palladium was hit hard, shedding $26 to $755, while platinum dropped to $1,202, down $17.
Stocks closed mixed, with the Dow and S&P 500 with modest gains, and the Nasdaq finishing flat. Yield on the 10-year Treasury note bumped up 1 basis point again, to 2.34%. The dollar gained from the news that the Republicans had achieved complete control of Congress, finishing up a half percent on the DXY index.
Wednesday’s Closing Prices
Economic News Affecting Gold
First-time jobless claims for last week were reported at 278,000, down 10,000 from the previous week. Those numbers were adjusted up by 1,000 in the most recent report. Analysts had expected a drop of only 3,000 applications. US productivity for the third quarter of 2014 rose more than expected, 2.0%, Analysts had expected a 1.5% gain. Wage pressures remained subdued, helping profit margins.
The Bank of England and the European Central Bank both left interest rates at historically low levels in separate meetings today. ECB president Mario Draghi told reporters that the ECB QE measure of buying select bonds would continue for at least two years, sending the euro common currency downward.
Geopolitical News Affecting Gold
Tensions are rising in the northeast Spanish region of Catalonia, which is defying Supreme Court orders and the federal government by proceeding with a November 9 referendum to secede from Spain. The government in Madrid has dispatched thousands of federal police to the region to prevent the vote. Catalans, who have their own language, suffered from repression for decades from the Franco regime after the Spanish Civil War for supporting the previous Spanish Republic. Catalans are also angry over what they see as their relatively affluent area being forced to bail out the rest of the country. Should they succeed in secession, Barcelona will be their capital.
Ukraine is reaching the flashpoint again, after rebels held elections in their breakaway regions in eastern Ukraine. The government in Kiev saw this as a breach of the ceasefire, and rescinded measures giving the areas greater autonomy. The rebels, in turn, declared that action a breach of the ceasefire, and the conflict has intensified. Today, Kiev claims that Russian soldiers are once again crossing the border into Ukraine to fight alongside the rebels.
The big news tomorrow will be US non-farm payrolls for October. This is considered one of the key indicators of the health of the national economy, and is one benchmark watched closely by the Fed to determine when to raise interest rates. The icing on the cake will be Fed chair Janet Yellen speaking at 10:30am at a central bankers’ conference in Paris on policy in response to the 2008 financial crisis. Also speaking are the ECB’s Benoit Coeure, Bank of India leader Raghuram Rajan, Bank of Mexico leader Agustin Carsens, and IMF chief Christine Lagarde.