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Precious metals are trading just above unchanged this morning except for silver, which is just below unchanged.
Gold saw softness in midday trading in Asia last night, but chopped upwards in London. Silver also eased in Asia, but did not see as much of a rebound in Europe. Platinum saw slight gains earned in Asia taken away in European trading, recovering later. Palladium saw much the same action.
Yesterday in the Markets
After starting flat for the day, the Dow and S&P 500 gained modestly to close at new records, while the Nasdaq climbed 0.41%. Treasuries fell, with the yield on the ten-year T-note gaining 6 basis points to $2.36%. The dollar also gained slightly, up nearly 1/5 of one percent to 87.805 on the DXY dollar index.
Gold gave up a large portion of Friday’s $37 gain, dropping $26.90 to close at $1,151.60. The other precious metals also consolidated after Friday’s big run.
Monday’s closing numbers:
The Russian ruble gained on tough talk from president Putin and news the central bank will start restricting the money supply by reducing the number of loans available to banks.
The Russian central bank also released its economic forecast, in which it estimated economic sanctions by the West would last until 2017, and that GDP would be flat for next year. Despite over $40 billion in currency intervention since October, inflation is running at 8% in Russia.
Economic News Affecting Gold
The ICSC – Goldman Chain Store Sales report rebounded from last week’s -1.6% to post a 1.5% gain. Year over year sales were up modestly, to 2.1%. The Redbook report showed retail sales up 3.8% from the previous year.
The yen fell to a new seven-year low against the dollar, propelling the Nikkei stock index to a seven-year high, in signs that Japan’s unprecedented stimulus has it winning the currency devaluation race (at least for now.) The dollar is trading flat, as the ruble gave back yesterday’s gains as the Russian currency broke a two day rally. The escalation of the conflict in Ukraine, with international observers reporting armored columns entering the country from the Russian border, is putting more pressure on the Russian economy. Part of Russia’s recent gold-buying spree is from purchasing domestic production that is blocked from being sold on Western markets.
Another factor is the plummeting price of petroleum. All oil exporting nations are feeling more pain this morning as Brent crude drops to a four-year low of under $82/bbl.
China has signed an agreement to open a yuan trading hub in Canada, expanding its network of bilateral currency agreements that freeze out the U.S. dollar.
The U.S. Mint announced late yesterday that sales of the American Silver Eagle bullion coin will resume on November 17 (next Monday). Supplies will once again be allocated (rationed). The Royal Canadian Mint is still allocating Silver Maple Leaf bullion coins.
Geopolitical News Affecting Gold
Sporadic violence continues to plague eastern Ukraine, as heavy shelling resumed this morning in the rebel-held province of Donetsk. The heaviest shelling in a month slammed Donetsk over the weekend, which followed elections held in the separatist-controlled eastern provinces.
Although a ceasefire has been in place since early September, the two sides have continued to fight, each accusing the other of violating the terms of the ceasefire. While it appears that Kiev has not upheld its claim to grant greater autonomy to the pro-Russian rebels, several international bodies have presented considerable evidence that the Russians are likewise not keeping their word by repeatedly providing the rebels with provisions and military-grade weapons, including Russian tanks.
Meanwhile, near the conclusion of the APEC summit in Beijing, Vladimir Putin and Xi Jinping signed a tentative trade agreement wherein Russia will supply China with natural gas. This follows an earlier gas deal struck by the two sides in May worth $400 billion. Russia is seeking to establish closer ties with China in accordance with the two power’s desire to see global finance and trade move away from the use of the dollar. Although nothing is yet concrete, there are proposals to build a pipeline from western Siberia to China in the near future; in the short-term, however, it is unlikely that China will supplant Europe as Russia’s biggest trading partner for its vast energy resources.
The G20 Leader’s Summit takes place in Brisbane, Australia this weekend, marking the last event of the calendar year for the large international cooperative. The leaders attending the summit will discuss possible broad-based solutions to the most pressing economic issues currently facing the global community. With “Fed Watch” in full effect as the central bank mulls when it will raise the federal funds rate, investors will be listening closely as Minneapolis Fed President Narayana Kocherlakota gives a speech in Wisconsin this afternoon at 1:30 pm. She is expected to clarify the bank’s monetary policy objectives in her address.