Gold is consolidating this morning, locking in some of the $35 an ounce gains it has logged since Monday. This is driven in part by the dollar attempting to pick itself up from a four-month low.
At 10 am in New York, spot gold is down almost $2 to $1,219.30 an ounce, while the DXY dollar index is up nearly half a percent to just under 94.
Wall St. gave up gains early after opening higher, and is hoping to extend yesterday’s rally after its recent losing streak. West Texas Intermediate Crude continues to slide this morning after recent rallies, down 1.6% to under $59 a barrel.
Yesterday in the Markets
Gold extended its rally to four days on Thursday, with spot gold closing at $1,221.40 an ounce, up $35.40 for the week. Silver gained another 2% to close at $17.45 an ounce, while platinum notched a $10 gain. Palladium dropped $5.00.
The dollar extended its long trip downward on Thursday, closing solidly below the 93.5 mark on the DXY index to a new four-month low. The dollar has fallen so far, so fast, that even Russia is buying dollars and selling its own currency, as the ruble had become too strong. (Who thought we’d hear that in May?)
The bond market (except Greece) was mostly calm yesterday, which combined with a better than expected first-time jobless claims report to put some wind beneath the wings of Wall St. All three major indices were up over 1% on Thursday, with the S&P 500 closing at a new record after its recent drubbing.
Factors Affecting Gold Today
The extended fall in the dollar reversed today, as investors this morning decided that the greenback had been oversold. This is counteracting what would normally be a continued rally in gold, had the dollar remained neutral or dropped again. Bond yields are stabilizing today, as more investors believe EU officials when they say that a Greek sovereign default will not spread a financial contagion across European markets.
Oil is lower by about 1% this morning, as analysts become concerned that lifting of sanctions against Iran will result in a million barrels a day extra hitting an already flooded market. Stocks should be happy, as lower oil prices exacerbate deflationary pressures, which prevents the Fed from raising interest rates in the near future.
The Empire State Manufacturing Index came in below expectations, at 3.1 compared to 5.1. Last month it logged an abyssmal -1.2. Today’s report was hurt by a drop in machinery orders. Overall industrial production in the U.S. contracted in April, for the fifth month in a row.
In the “bankers behaving badly” section of the news, the U.S. Justice Department is declaring prior LIBOR manipulation settlements with some “Too Big To Fail” megabanks void, as the giant banks lied and continued to break the law.
Traders will be watching the close today in gold and silver, to see if the precious metals can lock in the best weekly gain in two months.
Monday will give us retail sales in China, and homebuilder sentiment in the U.S.