The precious metals–especially silver–rebounded this morning, attempting to make up the considerable ground they have lost over the last week. Gold, platinum, and palladium each advanced by about $10 by 10 am EST this morning, and silver added 45 cents (+2.66%) to steady back near $17.40/oz. Equities were also pointing upward at the opening bell on some positive signs (both economic and political) from the mess in Europe. Crude oil continued its recovery, as Brent crude pushed above $61/bbl with both benchmarks rising sharply.
Yesterday in the Markets
Stocks in Europe and the U.S. were both up yesterday as the political landscape in Europe–though still unsettled–seemed to take on a rosier appearance. The precious metals remained mostly flat, opening higher before slipping back by Thursday’s close. Treasuries finally seemed to find equilibrium, with 10-year yields hovering right at 2.0%.
Factors Affecting Gold Today
While the dollar easing slightly and the attendant bounce in oil prices has been bullish for Wall Street, there is certainly some tail-risk remaining with the uncertain situation in Europe. Even with possible solutions seeming increasingly likely in both the Greek and Ukrainian crises, the world is hardly out of the woods yet.
Whether or not the fresh ceasefire in Ukraine, projected to begin this weekend, will be upheld is a matter of considerable doubt. Vladimir Putin has been rather vocal about his ambitions in the former Soviet satellite states; while invading the small, Eastern European state of Georgia in 2008, the Russian leader not only flouted the sovereignty of that state, but remarked that Ukraine was merely Russian territory. This arrogance by Russia toward its former vassal states from the Communist regime is clearly alive and well. Remember that much of the build-up that sparked the violence in the eastern part of Ukraine followed Russia’s controversial annexation of the Crimea early in 2014. Even with the tenuous ceasefire, a great deal of anxiety remains over how (and if) the European Union will place greater pressure on Putin to rein in his imperialist visions.
Meantime, the EU continues to try an hash out an equitable resolution to Greece’s debt problem. Patience seems to be the word of the day; euro are finance ministers have accepted that no deal will be struck with the Greek leaders before the end of the week, extending the talks to at least the middle of next week. It may take even longer for an agreement to be reached, but it seems that so long as the two sides remain in conversation with one another, the political goodwill between Greece and the rest of Europe should be enough to avoid more serious measures (i.e. more unpopular measures, such as the ECB stepping in and taking the reins of the Greek banking system).
In addition to the political environment staying on balance, the euro zone is also helped by Germany’s resurgent economy. The German economy expanded at twice its expected pace in the fourth quarter, while the country’s DAX stock index set an all-time high by crossing the 11,000 threshold. Unexpected growth also took place in Spain, Portgual, and the Netherlands. The S&P 500 also responded favorably to the data from Europe, aiming to crack a new all-time high of its own.
Monday is President’s Day, so U.S. markets will be closed. News about the progress of next week’s possible deal between Greece and its creditors will also be something to keep an eye on.