The victory of the left-wing Syriza party in yesterday’s Greek elections has yet to swing the markets one way or the other this morning. Syriza has formed a coalition with another anti-austerity party in order to form a cohesive government, raising concerns that Europe will economically as well as politically fragment if Greece reneges on its bailout loan from the ECB. The euro promptly fell to a new 11-year low, and is only trading around $1.12. The precious metals were each about 1% lower this morning as some profit-taking chips away at last week’s advances. Silver fared the best, steadying around $18.20/oz.
Yesterday in the Markets
Friday saw some slight pullback in the precious metals following their rally, which is to be expected. U.S. stocks were also modestly lower while the dollar continued to rise. Stocks in Europe rose on Thursday’s announcement of the ECB’s stimulus plan, though global markets were otherwise unsure of how to react.
Factors Affecting Gold Today
Crude oil prices are still tumbling after the incipient King of Saudi Arabia promised to maintain his predecessor’s strategy of full oil production, choosing not to lift by prices by choking out supply. This approach is probably Saudi Arabia’s only way to preserve its market share in the global oil trade, considering that the current supply glut would allow other producers to more easily replace any cuts to Arabian oil exports. At 10 am EST this morning, WTI crude was 0.60% lower at $45.32/bbl, while Brent crude was about 0.75% lower at $48.42/bbl.
Two interesting bits of news from BullionStar’s Koos Jansen: 1) Silver imports into India were up 15% in 2014, as the world’s largest gold-buyers have also diversified into the white metal as well in recent years. Little to none of the silver is exported, so although the chances of a silver shortage in the West are very slim in the near-term, the same eastward outflow has been occurring with silver as well as gold.
2) There has been a jump in gold withdrawals from the vaults of the Shanghai Gold Exchange. At least 122 tonnes of gold have left the vaults over the last month, and nearly 70 tonnes in the last week. While there is a significant amount of gold demand for the up-coming Chinese Lunar New Year, the more likely reason for the recent draining of the vaults is the Shanghai International Gold Exchange (a subsidiary of the SGE) loosening of its rules and fees for transactions involving gold contracts.
Fighting rages anew in eastern Ukraine, and many suspect that the Russian army may be behind an attack involving rockets that left a group of civilians dead. The escalation in the war may prompt new sanctions from the West; Russia has already been hit on both ends by economic sanctions and a collapse in oil prices. (Russia is actually the world’s #1 exporter of oil.) The ruble slid again as much of the investment pouring into Russia last week on European deflation fears is promptly exiting the country.
In other news, the first bitcoin exchange in the U.S. is expected to open today, which sent the price of the cryptocurrency climbing. While this may seal the expanded use of cryptocurrencies as a competing form of money, the decision has not been without controversy.
Tomorrow is a rather busy day for economic indicators, with the two-day FOMC meeting kicking off; durable goods orders will be reported; the week’s Redbook will be released, a barometer of consumer spending; the Case-Shiller HPI and new home sales will be announced; PMI Services Flash and consumer confidence numbers will be reported; and the Richmond Fed Manufacturing Index for January will be released.