Gold is moderately lower in late morning trading, as earnings beats on Wall St. and an unexpected surge in existing home sales put pressure on the metals.
Despite the good news, stocks and the dollar are both struggling below unchanged in New York.
Yesterday in the Markets
Spot gold reversed an early dip in by late morning trading, grabbing a tailwind around noon to cruise to a 0.5% gain. Silver ended up less than a third of a percent, closing with a 4 cent gain. Platinum mimicked Monday’s movements almost perfectly on Tuesday, closing up $2. Palladium was the only loser in precious metals yesterday, leaking slowly as the afternoon went on, closing down $4.
Crude oil futures fell 2% as Saudi Arabia announced an end to its bombing campaign in Yemen, reducing the dangers of attacks on oil tankers at the southern approaches to the Red Sea and Suez Canal. However, the Saudis announced that they would still conduct targeted airstrikes against the Shiite rebels in Yemen if they were found.
Reports yesterday that the European Central Bank was discussing how to stop pouring emergency funds down the bottomless pit that is the Greek banking sector sent the euro to nearly a 12-year low against the dollar.
Despite this boost from the falling euro, the dollar had given up all its gains by 11am in New York. It recovered in the afternoon to crawl along just above unchanged, into the close.
Stocks were mixed in New York, as the strong dollar squeezed overseas profits for several large companies, including DuPont and Travelers, resulting in disappointing earnings. The Nasdaq was the only major index in the green, buoyed by reports that Israeli generic drugmaker Teva made an unsolicited $40 billion offer to acquire rival Mylan.
In the ultimate “Bad News is Good News” trade, investors both foreign and domestic piled into Chinese stocks after the second major corporate default in as many days. The default Tuesday by the first state-run company was paradoxically seen as a big positive for the market, as it was taken as meaning that Beijing was serious about letting market forces work and allowing failing companies to… fail. Despite these landmark bond defaults, the Chinese junk bond market is still up 2.3% for April.
Factors Affecting Gold Today
Part of the correction in gold today may be due to estimates that Greece may not default on its sovereign debts until June. Athens has ordered all towns and cities to surrender any money they have to the national government, so it can cover welfare and pension checks, while it attempts to negotiate a more favorable bailout deal with its creditors.
In the U.S., existing home sales posted better than expected results for March, hitting an 18-month high. This was due in part to lower mortgage rates, looser credit qualifications, and more homes available for sale. Even though there were more homes for sale in March, supply is still so tight that prices were 7.8% higher than a year ago.
The scapegoat chosen by the U.S. for responsibility for the 2010 “flash crash” in the stock market, London day trader Navinder Singh Sarao, was granted bail this morning. The government’s case against Sarao is starting to look a bit shaky, as it has been revealed that the London “flash boy” working out of his home had stopped trading 2 minutes and 32 seconds before the flash crash even began. In a realm where trades are executed in milliseconds, two minutes is an eternity. Perhaps the Feds are moving against Sarao instead of the people who were actually trading and caused the crash, because Sarao isn’t politically connected?
Lots of economic news is due for Thursday. Flash manufacturing PMI is due tonight from both Japan and China; flash composite PMI from Germany, France, and the EU as a whole; retail sales in the UK; new home sales, first-time jobless claims, and the flash manufacturing PMI from the U.S.
Of course, first quarter earnings reports also continue.