Hawkish Fed Revives Dollar: Morning Market Update April 9

April 9th, 2015 by

Slightly better than expected first-time jobless claims, and a perceived hawkishness in the FOMC March meeting minutes released yesterday have revived the fortunes of the U.S. dollar. It was revealed that more than one Fed official wanted to go ahead with a June rate hike, while others wanted to wait until autumn, and couple even wanted to wait until next year.

The dollar is showing positive, but volatile action this morning oscillating between 98 and 98.5 on the DXY dollar index. Stocks on Wall St. are showing similar skittishness, jumping at the open on the first-time jobless report, then dropping into negative territory.

Gold is down moderately, after seeing pressure in Asia, recovering above $1200 in London, then dropping on the U.S. labor data

Yesterday in the Markets

The release of the FOMC minutes at 2pm yesterday was the big market mover in the U.S., while talk of massive mergers in Europe drove their markets to a new 8-year high. The dollar was lifted out of negative territory to close at 98 on the DXY for the first time in a week on the Fed news, which caused gold to grind lower during the afternoon session.

oil leakCrude oil prices were sharply lower, closing down almost 6% on news that crude inventories in the U.S. jumped at the highest rate in 14 years, and Saudi Arabia reported record oil production of 10.3 million barrels a day.

Spot gold closed modestly lower, down 0.46%, with platinum down about the same amount. Silver and palladium both closed about 1.9% lower.

Factors Affecting Gold Today

First-time jobless claims for last week grew by 14,000 to 281,000 new claims. This was slightly under the expected 285,000. Mainstream financial media are ignoring the increase to trumpet the four-week rolling average, which dropped by 3,000 to 282,250 – the lowest since June 2000.

A fractious Fed was revealed in the release yesterday of the March FOMC meeting minutes, which continues to reverberate through U.S. markets. Opinion on when to raise rates from the near-zero that they have been since 2009 was split between June and later in the year, with a few Fed officials voting to wait until 2016.

World stocks are not showing the nervousness of the U.S. market, as European stocks hit a new 8-year high on the back of ECB QE, better than expected industrial data from Germany, and the leftist government in Greece announcing that it will make today’s loan payment to the IMF.

factoryIndustrial production, imports, and exports all grew more than expected in Germany, and the EU auto sector seems to be recovering. Added to the near-zero borrowing costs and mergers being announced, and the EU stock market is on a tear.

In Asia, mainland China’s stock market is also red-hot. The government in Beijing is now openly encouraging people to invest in Hong Kong stocks, to divert money into an associated market that has not seen the explosive growth as the Shanghai index. It seems to be working, as the Hang Seng hit a new 7-year high today. Not to be outdone, the Nikkei index in Tokyo hit a 15-year high, as pension funds are forced into the stock market in  a search for yield. This mad rush into equities is pulling money out of the gold market.

Britain is a different story, though. With contentious elections only a month away and no party in the lead in recent polls, economic insecurity is growing. This election may determine whether the UK stays in the Eurozone or not. Stocks are already showing extreme volatility.

Crude oil is up nearly 2% this morning in a correction from yesterday’s hammering.

gold-investigationNot everyone is on the “Equity Express,” as the Perth Mint announced a surge in gold and silver sales for March. America’s largest gold mining company, Newmont Mining, has announced that it will begin construction on a new gold mine in Nevada, set to produce between 100,000 and 150,000 ounces of gold, starting in 2017.

This proves that there is still “gold in them thar hills.” If you want to try your hand at finding “wild gold” on your own, Gainesville Coins can help with a selection of metal detectors. If you don’t see the one you want, ask one of our friendly sales reps if it’s available.

 

looking-aheadLooking Ahead

Tomorrow, investors will be looking at the U.S. import and export price report, in an attempt to gauge inflation pressures. The U.S. Treasury report will reveal the monthly budget surplus or deficit of the Federal government.

Also on tap are industrial reports from France, the UK and India.

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