Both U.S. stock indices and the precious metals were pointing higher this morning as they attempt to reclaim the previous trading week’s losses. The dollar finally pulled back from its recent rally, but only slightly, remaining above 99.6 on the DXY. This has been holding down commodity prices: both crude oil benchmarks were more than 1% lower this morning, as an oversupply of petroleum in the U.S. has driven down WTI crude to below $45/bbl again. After a rough trading day Friday, Brent crude also slid back to just above $54/bbl this morning. The metals were mostly flat but looking to inch higher this morning, with silver back near $15.75/oz, gold at $1,155/oz, and platinum stuck below $1,120/oz.
Yesterday in the Markets
Stocks fell back on Friday after a solid recovery during Thursday’s trading. The metals were largely flat to close out the week as the dollar surpassed 100.0 on the DXY index. Bonds rose as yields on the 10-year T-note moved back to 2.08% from 2.14%.
Factors Affecting Gold Today
The European markets have picked up right where they left off last week, as stock indices were green across the continent while the euro continued to get pummeled. The common currency slid even further below $1.06, getting closer and closer to some analysts’ calls for parity with the dollar by the end of 2016–or perhaps even sooner, at this rate. The euro is currently at a 12-year low.
Meanwhile, German equities have notched an all-time high, which is playing some role in emboldening many German citizens to suggest that Greece should simply exit the eurozone. Although this has been a recurring theme in negotiations between the Greek government and its EU creditors, it is now becoming a mainstream political sentiment among German voters; polls show that 52% of the country’s citizens support a so-called “Grexit.” It’s clear that a robust German economy and stock market are fueling such opinions on the German side about how best to get the EU out of the debt crisis peaceably.
In the U.S., not only did factory production slide for the third consecutive month, but the Empire State manufacturing index also dropped in March, roiling experts who had predicted a modest gain in output. The measure still showed expansion for the manufacturing sector, but at a much softer pace than analysts expected. There was solid growth in employment , but the last month has seen frustrating shipment delays with the strikes at West Coast shipyards and ports along with the influence of the strong dollar eating into U.S. exports.
In the Ukraine conflict, Russia has responded to increased Western pressure near the country’s borders with an almost constant barrage of military “exercises” being conducted by the armed forces, by land, air, as well as by sea. The full-scale outfits of submarines, tanks, jets, and troops on the ground are clearly a bit of posturing by Putin against NATO; more than 6,000 casualties have resulted in the fighting in Ukraine’s eastern provinces thus far, although the most recent ceasefire agreement is seeming to take hold.
The FOMC meets tomorrow and will make its announcement on Wednesday afternoon at 2 pm EST.
by Everett Millman