Both gold and silver rose mdoerately higher in early morning trading, although the Platinum Group metals both tracked into the red. Stocks were also lower, as economic uncertainty seems to be coming from every direction, between the standoff between Greece and EU, the slowdown in China, the U.S. Steelworkers strike, and damning allegations against HSBC. Both crude oil benchmarks were up, with WTI outpacing its North Sea counterpart. 10-year Treasury yields stood at 1.92%.
Yesterday in the Markets
Friday saw the precious metals crash, capping a week of losses that pushed gold down to its support levels near the $1,230 mark and sent silver back below $17/oz. While palladium fared the best, halting its fall just below $790/oz, platinum continued to slide well below the gold price–a trend that hasn’t held up for very long, historically.
Factors Affecting Gold Today
The drama between Greece and the European Union continues to unfold, and is being exacerbated by the ongoing violence in eastern Ukraine. While the EU is still mulling new sanctions against those involved in the Ukraine conflict (possibly including Russia’s Deputy Defense Minister), it has presented a strong public front in the Greece issue, asserting that it will not meet the new Greek government’s current demands. Not only is Greece vowing to end austerity and not seek an extension on its €240 billion bailout loan, but now Prime Minister Tsipras is stoking nationalistic fervor by promising to exact reparations from Germany for its actions during WWII. Germany says these claims were resolved when the country was unified after the fall of the Berlin wall. As unlikely as it is that such war reparations will actually be paid, the bold demands by the Greeks only inflame the tensions within the Euro zone. Meantime, German and French officials are attempting to broker a peace between the pro-Russian rebels and Ukraine, threatening further sanctions on Russians and Ukrainians who aid and abet the rebels. U.S. and European stocks were down this morning as the story unfolds.
Gas prices have been rising Stateside with rising oil prices. Not only have fracking operations been shutting down due to lack of profitability, but the workers’ strike organized by United Steelworkers has now numbered some 5,000 workers after a pair of walkouts hit refineries in Ohio and Iowa. Royal Dutch Shell is negotiating with the union on behalf of several different oil companies; the employers have been using replacement workers at some of their factories, but this will hardly make a dent in the lost labor. While officials from Shell have stated that they are aware of no unfair labor practices, the refinery workers are striking for better health benefits and shorter hours, as some are claiming to have been subjected to 18 consecutive working days without a weekend. Until the strike is resolved, expect gas prices to continue to climb gradually.
The other big news over the weekend was the acknowledgement that the Swiss arm of HSBC, the U.K.’s biggest bank, helped tens of thousands of people from all over world hide from taxes by placing their earnings in secret Swiss bank accounts, dating back to at least 2007. The information was leaked by computer hackers and turned over to Her Majesty’s Revenue and Customs in 2010, but is now being made public. HSBC claims that it was taken advantage of by the individuals who dodged paying taxes. Though the trope of evading taxes through Swiss accounts is becoming fairly tired, it is worth noting that the 7,000 British citizens in the list of over 100,000 have thus far paid back the government some $190 million in total.
Stocks were mostly down in Asia as well today, as the news and evidence of China’s slowing economy continue to come down the pike. The country is expected to cut its GDP growth projections for 2015 to 7% after growing by about 7.4% in 2014–the weakest annual growth for the country since 1990. Chinese exports are down more than 3% year-over-year, while imports have been slashed by one-fifth, the biggest drop for imports since 2009. The more China implements monetary easing policies to deal with the slowdown, the more gold the People’s Bank may buy to hedge itself.
The JOLTS report comes out tomorrow morning, along with the release of the weekly Red Book and consensus wholesale trade numbers.