The precious metals were mixed this morning with silver peeking into the green, while gold and palladium were both marginally lower. Platinum sat at unchanged. The metals will look to carry over Wednesday’s rally, but may be held back by the robust dollar. The greenback was again approaching 99.0 on the DXY index. Similarly, the stock indices were mixed, with the Nasdaq poking into the green this morning while the Dow Industrials and the S&P 500 both opened in the red. Inflation expectations are also being tempered by the renewed slide in oil prices: Brent crude was down nearly 3% this morning at $54.30/bbl while WTI crude slipped 4% to $42.80/bbl.
Yesterday in the Markets
Following the Fed announcement, things moved quickly: U.S. stocks rallied about 1% each, while the precious metals finally advanced, pushing gold back above $1,160/oz and silver just a hair above $16/oz. 10-year Treasuries surged, with yields falling back below 2%. The dollar eased, briefly pushing the euro back to $1.10 before the two currencies reversed directions.
Factors Affecting Gold Today
Yesterday’s announcement by Fed Chair Janet Yellen, and the accompanying statement by the FOMC, may have seemed hawkish; yes, the committee will now be evaluating potential rate hikes on a meeting-by-meeting basis now, adding uncertainty and unpredictability to the central bank’s monetary policy, but the announcement essentially confirmed that a strong dollar and weak energy prices will hold inflation below an acceptable level for the Fed to move on its benchmark rate. The sentiment seems to be that rates will increase as soon as inflation picks up–a wonderfully ambiguous way of keeping the markets guessing.
Meanwhile, weekly jobless claims came in only slightly higher at 291,000 new claims. Employment was another area that the Fed wanted to see shored up before acting on interest rates, but the data continues to be fairly strong. Headline unemployment has fallen to around 5.5%, and this is even with the massive layoffs in shale oil fields. The current account deficit did widen, however, during the fourth quarter, which somewhat defies the record oil inventories and slumping crude prices (West Texas Intermediate being the weaker of the two world benchmarks) in the U.S.
A report from the Perth Mint shows that sales of its Platinum Platypus coin have spiked, and could easily surpass the sales totals of the last two years combined. The fresh demand for platinum as an investment is no doubt related to the slump in platinum prices, opening a (typically short-lived) window where platinum is a cheaper alternative to gold. Even with last year’s 5-month strikes in South African platinum mines, ample above-ground supplies of the metal remain available; otherwise, the platinum price would have already fallen even further.
Greece continues to find itself in a precarious position with its European creditors. After ruffling feathers by making ostensibly inadequate progress on its bailout loan-dependent reforms earlier this week, the Greek administration again offended its continental peers by passing poverty reforms through its legislature without at all consulting the rest of the eurozone. It seems that the rest of Europe, particularly Germany, are losing patience with an uncooperative Greece. Although the EU summit in Brussels this week and Berlin next week is focused on the crisis in Ukraine and the attendant energy security issues, German Chancellor Angela Merkel is expected to have discussions with Greek PM Alexis Tsipras about the Greek debt situation at the meetings.
Tomorrow is a “quadruple witching,” wherein stock index futures, stock index options, stock options and single stock futures all expire on the same day. This generally leads to higher volumes of trades and more volatility on the markets on a witching day. The Atlanta Fed Business Inflation Expectations report comes out at 10 am EST. Abroad, PPI numbers are announced in Germany, while CPI and retail sales are released in Canada.