Spot gold is pushing a two-week high this morning in New York, set for its biggest weekly gains since January. Equities, commodities, and forex contracts are seeing extra volatility at the New York open, as today is a “quadruple witching day” in the US. Wall St. is hoping that it can regain recent losses after the expected early morning fitfulness subsides.
Yesterday in the Markets
Stocks were mixed on Wall St., as gold, silver and platinum used the recent dollar weakness to notch modest gains again. Palladium was the odd man out, dropping $17 an ounce. The Perth Mint announced that it has already sold more platinum coins this year than it did for the entire year of 2014, as investors jump on what they see as temporary weakness in the “other white metal” to load up.
Factors Affecting Gold Today
The dollar continues to swoon today, trading this morning down 1% against a basket of currencies. The greenback is set to record its worst week since 2013, while the euro strengthens and the yuan is experiencing its biggest weekly rally since 2007. This is giving Asians and Europeans a chance to grab some gold in slightly more favorable currency exchange rates, as worries about Greece mis-judging how far they can push the EU, and experiencing a “Grexident” (unintentional expulsion from the euro) grow.
In the “New Bosses, same as the Old Bosses”department, the new London gold fix began today. The prices are being set by the four mega banks that have always been setting the price (Barclays, HSBC, Societe Generale, and Bank of Nova Scotia,) joined by… Goldman Sachs, and Switzerland’s largest bank, UBS. This is a lineup sure to quiet concerns over gold manipulation, right? Many analysts are wondering why the Chinese mega banks were shut out of the new gold fix, seeing as how China is not only the world’s largest producer of gold, but also the world’s largest consumer.
In another blow to US/dollar influence over the world banking system,Switzerland has joined the UK, France, and Germany in applying to be charter members of the new Chinese-run Asian Infrastructure Investment Bank. China decided to found this alternative to the IMF and World Bank to combat what it sees as undue US and Japanese influence over those two international banking entities. The Chinese government also continues to shrink its holdings of US debt, though that may partly be in anticipation of rate hikes by the Federal Reserve. Why buy low-yield Treasuries now, when you can wait a bit and get some with a higher yield?
The strike at the second-largest copper mine in the world, the Grasberg Mine in Indonesia, is in it’s fifth day. This is giving support to global copper prices, and may be having a spillover effect on gold prices, since the Grasberg Mine also produces substantial amounts of gold and silver as a by-product of its copper mining operations.
Monday will be pretty light on economic reports, with the US existing home sales being the most important. This, of course, does not take into account any continued grandstanding and posturing by Syriza and the EU over the Greek crisis. Greece has raided pension funds and the cash reserves of public utilities in order to meet debt repayments due this week. How long can this go on?
by Steven Cochran