U.S. indices pressed forward into the green this morning while commodities continued to behave sluggishly ahead of the Christmas holiday. Crude oil prices opened lower, helping drag down the precious metals across the board.
With markets closed tomorrow for the holidays, and many traders already on vacation, trading volumes have been rather light, leading to some higher volatility.
Yesterday in the Markets
In spite of some lingering concerns around the globe about a slowdown of the world economy, the U.S. seems to happily chug along. Tuesday saw both the Dow Jones and the S&P 500 notch new closing highs, with the former vaulting past 18,000 for the first time in the history of the index. After a mini-correction in equities about two weeks ago, the Dow quickly rose by nearly 1,000 points in a matter of 7 trading days.
While the S&P was also strong, closing above 2,080, the Nasdaq was dragged down by poor performance in the energy sector, and was the only index to end in the red. Nonetheless, both crude oil benchmarks ended the day over 2% in the green, perhaps establishing solid support below their current levels. The dollar has been robust, moving above 90 on the DXY index to a five-year high. The rising tide–try tidal wave–for stocks coincided with a drain of funds from government bonds, sending the yield on 10-year Treasuries some 9 basis points higher to 2.27%.
Factors Affecting Gold Today
The precious metals have struggled to break out of their recent slump, with gold sliding below $1,175 in Wednesday morning trading. Silver and platinum are both sharply lower, while palladium has been the only metal of the bunch to keep its head above water. Though platinum prices have fallen well below $1,200, its cousin palladium remains around $815.
Weekly jobless claims fell to a 7-week low after the Labor Department revised last week’s numbers down to 280,000 new claims. This comes in below analysts’ expectations of 291,000, and helped fuel more bullish sentiment in stocks during the winter holiday season. Payrolls and, consequently, household purchases have been on the rise over the last few months, a sign that the labor market is picking up along with spending. This marks the fourth consecutive week in which jobless claims fell. Consumer spending and home prices were also on the rise in November.
New home sales came in below expectations, dropping 1.6% in November from the month previous. The 438,000 new homes sold was the lowest figure in 4 months. Durable goods orders from factories also fell by 0.7%. Yet, as has been the case recently, even less-than-exciting news for the economy has been absorbed by the growth in stocks and the strength of the dollar. There is also a great deal of positive sentiment relating to the upward revision of 3Q GDP numbers from 3.9% to 5.0%, although this is partly due to shuffling the numbers with Obamacare enrollees from the first quarter.
The stronger the U.S. economy continues to look, and the more crude oil prices trade sideways or lower, the greater the drag on precious metal prices will be. In basically all asset classes, we have seen greater seasonal volatility recently, due in no small part to the thin volumes associated with the holidays.