Markets got an early morning surprise today, when third quarter GDP in the U.S. was revised upward rather than downward. The revised print was +3.9%, up from +3.5%.
Gold dropped below $1200 and the dollar briefly touched a five-year high before both reverted back to previous levels.
At 10am, gold was unchanged from Monday’s close at $1198. Silver was up 1%, platinum up 1.33%. and palladium .63%. The dollar suddenly plummeted at 10am, as consumer confidence in the U.S. was reported at a five-month low. Wall St., which had opened higher, was also brought lower by the news. Crude oil is rebounding slightly, with West Texas Intermediate near $76.50 a barrel, and Brent around $80.30.
Yesterday in the Markets
Stocks were mostly steady in New York Monday, after opening higher. The Dow dipped in and out of negative territory all day, with a late effort to finish seven points into the green. The S&P was up nearly six points, with the Nasdaq the leader for the day, up almost 42 points.
Gold recovered from weakness in Europe, but still closed slightly under the $1200 mark. Silver was steady after grabbing a big boost before the COMEX open to wipe out losses in Europe. Platinum was the big loser Monday in precious metals, shedding $20.00, 1.64%. Palladium ended nearly flat, up just one dollar.
Treasuries were flat, with the yield on the 10-year note dropping one basis point to 2.30%. The Fed starts getting antsy when the 10-year yield gets below 2.3%, so this may be something to keep an eye on.
Monday’s closing numbers:
Economic News Affecting Gold
The surprisingly strong GDP report had only a momentary effect on gold this morning. The plunging dollar is lending support to precious metals. German GDP also came in better than expected this morning, up 0.1% from the -0.2% in the second quarter, to rise at a 1.2% annual rate.
Housing prices in the U.S. increased at a slower pace in September, up 4.9% at an annualized rate, compared to 5.6% in August.
Gold demand in China through Hong Kong is up 2.9% this month, marking the third month in a row of increases. Most of this was jewelry, as Hong Kong is the favorite place for mainland Chinese to buy gold jewelry. Gold bars are increasingly being brought into China via Shanghai, or directly into Beijing, to avoid the eyes of the West. Hong Kong’s reporting methods, a legacy of their history as a British colony, are more transparent.
The expectations of ECB QE has the bonds of marginal nations in the EU yielding less than those of the U.S. (arguably the most robust economy in the world at the moment.) Spanish 10-year notes are yielding under 2%, Italian notes under 2.2%, irish notes under 1.5%, and French notes under 1.2%. This is all because it is expected that the ECB will soon start direct purchases of these bonds.
Analysts at Johnson Matthey estimate that the five month long miners’ strike in South Africa this year will cause the platinum supply deficit for 2014 to reach 1.1 million ounces. The supply deficit for palladium is expected to be 1.6 million ounces. Part of this shortfall is being made up by platinum bars being pulled out of storage in Switzerland and used for industrial purposes.
Geopolitical News Affecting Gold
The news most affecting gold is the reactions of certain sectors of the European electorate regarding this historical store of wealth. Stung by the surprise repatriation by the Dutch of 122.5 metric tonnes of their gold reserves from the NY Federal Reserve, the right-wing National Front party in France is now pushing for repatriation of French gold. Meanwhile, the clock ticks down to Sunday’s referendum in Switzerland for not only repatriation of the nation’s gold, but a return to a fractional gold standard.
Plunging oil prices and sanctions over Ukraine are hurting the Russian economy. The nation’s finance minister said that the bear market in crude is costing Russia $90 billion to $100 billion a year. Russia is expressing hope that OPEC can agree to stop cheating on production numbers in its meeting on Thursday, in order to halt the decline in crude prices. Russia’s finance minister also admitted that economic sanctions were costing the Russian economy $140 billion a year, a situation that Russian president Vladimir Putin called difficult, but not fatal.
The U.S. reports durable goods orders, first-time unemployment claims, personal income and outlays, consumer sentiment, new home sales, mortgage applications, and pending home sales.