Gold Rallies Sharply: Morning Market Update June 1

June 1st, 2015 by

Gold went vertical at 9:30am this morning, quickly grabbing over $10 an ounce and breaking through the $1200 level. Silver is coming along for the ride, up over 2% in early New York trading.

Stocks also opened higher on Wall St, as “Beijing stimulus” shoots Chinese stocks up another 5%. In a familiar refrain, the dollar rallied in Europe, only to lose those gains in New York. Oil futures are down slightly, but WTI is still above $60 a barrel.

Yesterday in the Markets

stock-market-downThe theme for Friday on Wall St was “out of stocks, into bonds,” as the 10-year Treasury note saw its yield drop to 2.097%, a 3-1/2 week low. Stocks were pressured by the huge negative revision in first quarter GDP in the U.S. Stocks staged a failed rally midday that ran out of steam before they could get into positive territory, then fell into the close.

The dollar could never find its groove, as unexpectedly weak economic data and the “he said, she said” seesaw of press statements out of Europe regarding the Greek debt crisis kept the dollar market off-balance. The greenback finished the day slightly in the red.

oilOil had a good day, however. Crude futures were up over 5% on the day, with WTI breaking the $60/bbl mark and Brent rising over $65/bbl. Oil prices were helped by news that another 13 oil rigs were idled last week, bringing the total active count to 646. That is less than half the number of active rigs from last summer, when oil was $107/bbl.

Spot gold and silver closed just above unchanged, while the PGMs saw modest losses. The $1186 support level for gold held for another day, as the yellow metal was up $2.20 to close at $1190 even.

Factors Affecting Gold Today

The dollar gave up gains notched in Europe, and is near-unchanged at 10am. Stocks opened higher, but fell to near-unchanged themselves before being rescued by the ISM factory index rising more than expected. The reading of 52.8 is the best in the last three months. Analysts were expecting a reading of 52.0.

Stock prices have risen this year in large part to the biggest surge in stock buybacks in history, a trend that has become so pronounced that even Goldman Sachs is warning about it. As stock prices continue to climb in a season where the market usually enters the doldrums, it’s worth noting that more money has been borrowed to buy stocks on margin than anytime in history.

The Greek crisis grinds on, and grinds on European economies. Goldman Sachs is making waves this morning, with its conclusion that a Greek deal is impossible without a change in government or a national referendum. Noting that Greece want to “have its cake and eat it,” the ultimate choice for them is either default (and leave the euro,) or submit to continue austerity measures. Expecting daily withdrawal limits, or even seizure of their deposits, Greeks are lining up to pull everything out of the banks. There was €800 million withdrawn from Greek banks in 48 hours up to last Friday.

Speaking of having some cash on hand, hurricane season begins today in the U.S. In addition to having a few day’s worth of cash, be sure to review your hurricane survival kit, and replace any expired items. As we’ve seen, not even New England is safe from hurricanes. Be prepared, before the storm bears down and people are fighting in the grocery store aisles.

 

looking-aheadLooking Ahead

Tomorrow we have auto sales and factory orders in the U.S. (watch for stocks to get “rate hike willies” if factory orders are as good as the manufacturing index was today.) We also have consumer prices for the EU as a whole, where we will see if money printing by the ECB has offset worries over a Greek default.

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