The dollar touched new highs on the DXY spot index on Tuesday morning before easing back to about 95.4, still a very robust reading. The dollar’s strength can be attributed to weaker exchange rates for the basket of currencies the dollar is measured against, such as the yen and the euro, as well as gathering steam for the Federal Reserve to raise its lending rate in the near-term. The precious metals were all moving into the green this morning, while crude oil prices were also higher, with WTI priced just above $50/bbl and Brent crude over 2% higher at $61/bbl. Stocks opened lower in the U.S. after finishing in the green yesterday.
Yesterday in the Markets
The Nasdaq rose above 5,000 for first time in 15 years, and only the third time in the 44-year history of the index. Stocks all advanced while gold and silver ended the day down, erasing gains earlier in the day. Treasury yields on the 10-year note fell to 2.10%.
Factors Affecting Gold Today
It would seem that Janet Yellen is working her magic on the markets again, roiling currency traders who have caught on to the pattern that her comments invariably lead to a spike in the dollar. This has become increasingly true as we get nearer to the impending rate hike for the Fed. Yet, with Yellen’s testimony in front of Congress last week, the predictable pullback against dollar bulls has left many in the hole when trying to “bet on Yellen.” Though long positions on the dollar remain the most popular trading position on the markets, investors have cut the total amount of these bullish bets until we see another sign of when rates will rise.
Speaking of banking, megabank Barclays has been cooperating with Department of Justice investigators in their probe into rigging and manipulation on the financial markets. No less than 10 Too-Big-To-Fail banks are being targeted by the DoJ and the Commodity Futures Trading Commission (CFTC) for manipulating precious metal prices. Swiss regulator FINMA has led the charge to investigate the banks; Germany’s Bafin, a regulatory agency, is looking into the gold, silver, and platinum price fixes; and Britain’s Financial Conduct Authority is probing gold manipulation more broadly. Meantime, gold appetite on the paper markets rose to a one-year high according to BullionVault’s Gold Investor Index.
More woes for Ukraine are coming, as the country’s central bank has raised its refinancing rate from 19.5% to a whopping 30% in order to stave off the rapid decline of the hryvnia. The Ukrainian currency has been the world’s worst performer since the middle of last year, losing 60% of its value against the dollar. The rate increase helped push the hryvnia over 9% higher versus the greenback. Ukraine is also hoping to secure more bailout funds from the IMF, engaging in austerity measures by cutting its pensions and raising taxes.
The ADP Employment Report and the EIA Petroleum Status Report will both be released tomorrow, along with PMI Services Index and the ISM Non-Manufacturing Index.