Both gold and silver opened markedly higher this morning while Fed Chair Janet Yellen’s gives her second day of testimony in front of Congress today, speaking in front of the House Financial Services Committee. Gold was up about $8 this morning, back above $1,205/oz, while silver was back up 25 cents, better than 1.5%, to $16.50/oz. Platinum and palladium were also up slightly in early trading. After yesterday’s unsurprising “Yellen Rally,” stocks pointed slightly lower this morning, but will likely advance following the Fed Chair’s semiannual testimony to the House of Representatives.
Yesterday in the Markets
After Mrs. Yellen ambivalently said the FOMC will make decisions on rate hikes on a “meeting-to-meeting basis,” U.S. equities gained on Tuesday, with both the Dow Industrials and the S&P 500 hitting new record highs. Meanwhile, Treasuries saw considerable demand, as 10-year T-note yields slid all the way back to 1.98%. The dollar eased back, but both precious metals and crude oil fell nonetheless.
Factors Affecting Gold Today
Various commentary this morning is citing short covering as the main reason for the rise in gold, along with bargain hunting at depressed prices, and rising physical demand. Most likely, bullion buyers around the world will add a bit to their holdings while prices are still this low. This looks to be the first time in five days that gold closes in the green. Only palladium has remained relatively strong, edging back above $800/oz despite the past two week’s losses in the sector.
Don’t be surprised if the Nasdaq finally breaks its winning streak today, as Apple shares may drag down the index; Apple received a judgment in a lawsuit to pay $533 million for not honoring a patent held by a smaller company for the technology behind Apple’s music downloading features on iTunes. Though half a billion dollars is nothing to sneeze at, the negative publicity is likely more damaging to the tech giant’s bottom line. Apple has the greatest weighting on the Nasdaq, and has been a big driver behind the index’s 10-day rally.
In banking news, murmurs are that HSBC may be broken up now that the bank is under serious fire in U.K. for allegedly engaging in tax evasion and money laundering through Swiss accounts for many of its clients. Some are calling for the dissolution of the bank’s Swiss arm, and an overall devolution of its operations; the company’s CEO Stuart Gulliver and its chairman Douglas Flint are answering questions before Parliament today, speaking before the Treasury Select Committee. To make matters worse for HSBC, it’s come to light that Gulliver keeps his bonus payments in a Swiss account. Meanwhile, BNY Melon has now joined the alleged forex manipulation gang. The bank is cooperating with the Department of Justice in a series of class action lawsuits relating to the bank’s less-than-transparent characterization of currency exchange rates to clients.
On the political front, President Obama has kept his word and vetoed the Keystone XL pipeline legislation passed by Congress. The measure to build a direct oil pipeline between Canada and the U.S. has received bipartisan support in both chambers of Congress, yet has ultimately been opposed by the president for political reasons. All indications are that Republicans will attempt to force the measure through anyway by securing the two-thirds vote in the Senate to override the veto.
European shares are benefiting from the fresh accord with Greece over its debt situation, as London’s FTSE 100 jumped to an all-time high yesterday. Greek stocks are also surging, with the Athens ATG index rallying in earnest, adding nearly 10% on Tuesday. The country’s benchmark stock index continued to point upward this morning, while Greek bonds are handsomely rewarding investors who stuck with the fledgling Mediterranean country’s sovereign debt through the shakiest points of the recent crisis. The EU and Greece are not out of the water yet, however, as the approved list of compliance proposals from Greek officials requires greater details and clarification going forward.
Economic trends in China continue to have a strong pull on the global economy. In mixed news, China’s factory orders hit a 4-month high in February, but new export orders have been shrinking fast, dropping at their swiftest pace since Summer 2013. The country’s PMI index currently sits at just 50.1, with any value below 50 representing a contraction. In addition, data now shows that Hong Kong’s GDP was shaved by 2.4% in 2014 as result of last year’s pro-democracy protests that shut down much of the metropolis’ business district during autumn.
Tomorrow is a rather busy day for economic data in the States: the consumer price index, monthly durable goods orders, and weekly jobless claims are all released bright and early at 8:30 am EST, while the FHFA house price index, the EIA natural gas report, and the Kansas City Fed Manufacturing Index will all come out later in the morning.