Gold was moving slightly higher this morning as the dollar continues to pull back from its recent rally, registering below 96.75 on the DXY index. Spot gold was above $1,192/oz around 10 am EST while silver was hovering around $17/oz. Meanwhile, stocks will look to advance today after Monday saw all three U.S. indices turn negative just at the very end of trading. Equities were down at the opening bell in the States, while in Europe shares were jumping on positive sentiment in the euro area.
Yesterday in the Markets
Stocks saw a late downturn at the end of the day after spending almost all of Monday’s session slightly in the positive. Gold and silver rose again, building on last week’s upward reversal, although the Platinum Group Metals were less energetic. Treasuries rose, pushing 10-year yields down to 1.90%. Yields on 30-year bonds are currently at 6-week low.
Factors Affecting Gold Today
Stocks in Europe were higher essentially across the board this morning as data shows the eurozone is experiencing its highest level of business activity in 46 months. The outlook for the region is also being bolstered by Germany’s quickening business expansion: business growth is at its highest in 8 months, and the country’s composite PMI showed a record number of new orders over the last 9 months. France also saw growth in the business sector in February. This is helping boost consumer confidence in Europe, a welcome development with the continued uncertainty in Greece. The euro firmed up to around $1.09 on yesterday’s slide for the dollar.
The yen also firmed up thanks to the dollar’s drop. Japanese officials, meanwhile, are imploring the incipient Asian Infrastructure Investment Bank (AIIB) being joined by 30-odd countries, including many in Europe, to solidify strong ties with the already-existing Asian Development Bank (ADP). Japan will likely not be a member of the AIIB, but would do well to keep the Beijing-based banking partnership within its sphere of influence in the Pacific.
Though the AIIB has gotten quite a bit of publicity recently, the economic news has not been great for China as of late. Chinese factory data showed an 11-month low for output, adding to the slowdown narrative for the world’s second-biggest economy. This slowing of factory and business growth in China has come despite the government’s effort to stave off contraction through rate-cutting and other easing measures. On a brighter note, China has confirmed it will be closing its last four coal power plants next year as pollution continues to be a deep concern.
In the States, core CPI rose for the first time since October, data released today showed. Prices have actually been growing at a relatively healthy rate, but the crash in oil prices has been a constant drag on the overall data. Interestingly, crude prices reversed direction this morning, as WTI pushed toward $48/bbl, despite the news that Saudi Arabia’s oil output is currently at or near an all-time high. The Saudis have been able to gain market share in the global oil trade amid falling prices by deciding not to cut their production. New home sales numbers in the U.S. were also expected to show gains.
In central banking news, several different players at the Fed have been weighing in on when the potential rate increase will take place. San Francisco Fed President John Williams indicated that “mid-year” would be an appropriate time to start discussing the costs and benefits of making cuts to the Fed’s benchmark rate. This is somewhat more hawkish than what is being portrayed in the financial media. Similarly, outspoken St. Louis Fed President James Bullard has expressed satisfaction with the removal of “patience” from the language of the FOMC’s forward guidance, citing the need for a more imperative approach to starting to normalize monetary policy. It would seem, however, that all of this hawkish sentiment is blunted by the Fed’s overarching dovish outlook for the next few months.
In the U.S., durable goods orders and the EIA petroleum status report come out tomorrow. China’s UBS Consumption index will be released. In Europe, France’s Business Climate indicator and Germany’s analogous Ifo survey (i.e. its Business Climate index) will both be announced.