The precious metals are seeing renewed demand this morning, each rising into the green in early morning trading. After putting together three consecutive days of solid action, spot gold is again approaching the important $1,200 mark after slipping below $1,150/oz as recently as last Thursday. Silver also showed strength, moving up over 0.6% to about $17.10/oz. After a few rough trading sessions, both of the Platinum Group Metals are also advancing this morning. Although U.S. stock indices opened mixed, they are expected to get a boost today from the merger of food giants Kraft and Heinz that is in the works.
Yesterday in the Markets
Stocks spent most of the day in positive territory before nosediving marginally into the red by the closing bell. Meantime, Treasuries saw demand, sending 10-year and 30-year yields down. The precious metals were mixed, with silver remaining steady, gold advancing slightly, and the PGMs slipping.
Factors Affecting Gold Today
Durable goods orders were unexpectedly down for February, signaling that U.S. manufacturers are being held down by foreign buyers turning to cheaper alternatives to dollar-denominated goods. Weakness in coal and copper prices are also eating into new orders for mining machinery; this slowdown of capital expenditures seems to point toward lackluster economic growth around the globe during the first quarter of this year.
The dollar fell again to about 96.6 on the DXY index, while 10-year T-note yields also fell to 1.86%.
In line with this projection of weaker growth, crude oil prices were sliding overnight, though they looked to recover some of those losses this morning. The slide was fueled by news that China is also sitting on record-high stockpiles of oil, just as Saudi Arabia and the U.S. seem to be. Today’s EIA Petroleum Status report will reveal whether or not U.S. crude inventories rose to a new record level for the 11th consecutive week. Shares in Asia were marginally in the green at the end of last night’s trading session.
In Europe, Germany’s Ifo survey showed an improving business sentiment in the continent’s largest economy, helping the euro gain against the dollar to nearly $1.10. At the same time, this is capping the stock markets in Europe, which opened solidly in the red across the region. Meanwhile, Greece is still trying to work out a deal with the EU as its funds continue to dwindle. The Greek government isn’t helped by the ECB’s recommendation to Greek banks to cut their exposure to their own government’s debt.
The central bank was seen more favorably by other banks around Europe, as there are signals that the ECB QE stimulus is beginning to take hold. Many European banks have finally been able to clear their balance sheets of old asset-backed securities that until recently were wholly illiquid at reasonable prices. It is hoped that the more these banks can unload their unwanted assets and tighten up their balance sheets, the more the structural integrity of the continent’s battered banking system will improve.
In mining news, global player Freeport-McMoRan is seeing a sharp increase in trading volume after the company announced a new dividend payment for shareholders to be distributed on May 1st. Though the company’s stock price currently sits at about $19 per share, its 200-day moving average is $25, and many analysts are predicting a considerable buying spree for the mining and resource conglomerate. For perspective, Freeport’s market capitalization is a hefty $20 billion.
As mentioned earlier, the big M&A news this morning is the agreement between Kraft Foods and Heinz (which does a lot more than just make ketchup). This merger is being facilitated by 3G Capital and Warren Buffet’s Berkshire Hathaway, and it could create North America’s third-largest food and beverage company. The two companies combined would hold eight billion-dollar subsidiary brands and five more brands valued at more than half a billion dollars.
In Europe, French GDP numbers and British retail sales figures will be released, along with the eurozone M3 money supply. Japan sees its CPI, household spending, retail sales, and unemployment numbers released. In the U.S., weekly jobless claims will come out, along with Flash Services PMI and the KC Fed Manufacturing index.