Metals Get Corrective Bounce on Softer Dollar: Morning Market Update July 23

July 23rd, 2015 by

The precious metals opened slightly firmer this morning thanks to the dollar falling more than 0.4% on the DXY index to 97.18 this morning. This development, along with the news that Greece is progressing in its debt discussions with its European creditors, is helping push the euro near $1.10 again. The positive correction for the metals may be capped during trading today thanks to jobless claims dropping by 26,000 to 255,000 new claims this week, the lowest levels in 42 years, dating all the way back to the Ford Administration. The outlook for U.S. indices was clouded at this morning’s open despite the strong jobless claims data, while both European and Asian shares were in the green. Spot gold was about $3 higher this morning, while platinum and palladium gained 0.6% and 0.8%, respectively. Silver, meanwhile, was mostly flat at $14.88/oz.

Yesterday in the Markets

Wednesday was another rough session of trading for the metals, although losses certainly slowed from the previous string of days spent in the red. While the platinum group metals were flat from their levels Tuesday, gold gave up $7 to $1,095/oz, the first time the yellow metal had fallen below $1,100 in over 5 years. Spot silver lost 5 cents to $14.90/oz. The paper gold price from COMEX fell for the 10th straight day, the worst such streak since 1996. Meantime, stocks tracked lower in the U.S. as the Dow Industrials fell 0.38%, the S&P 500 lost 0.24%, and the Nasdaq (pulled down by Apple and Microsoft) led the way at 0.70% lower.

Factors Affecting Gold Today

mcdonald'sThe jobless claims report this morning was welcome news for investors who have been dealing with ambiguous signals from corporate earnings season. Equities have been sensitive to underwhelming profits reported by big U.S. firms—for instance, Apple, which somehow simultaneously exceeded expectations and came up short. The earnings data continues to be mixed: McDonald’s posted its 7th consecutive quarter of falling sales, yet General Motors saw its earnings soar during the second quarter as profits from its North American operations doubled.

mine shaftA number of companies’ revenues have been cut by the slump in crude oil prices (in addition to the number of drilling operations that have gone offline due to being unprofitable when gold prices fell below about $1,200/oz). Similarly, the drop in precious metal prices are hurting the biggest mining companies: Freeport-McMoRan reported a loss in Q2, though the global conglomerate actually more than doubled its gold output in order to service its debts at cheaper metal prices. While much of the mining sector (oil included) has been hit by this development, another mining giant, Newmont, actually improved upon its year-over-year performance thanks to lower costs. In other news, construction equipment maker Caterpillar fell while Credit Suisse beat analysts’ estimates.

On the banking front, Bank of America has surprised by letting go of its CFO, Bruce Thompson, as part of a larger reshuffling that will see CEO Brian Moynihan step down, as well. The bank is embarking on this reorganization after being rocked by a series of scandals that have frustrated financial regulators and cost BoA billions in fines.

looking-aheadLooking Ahead

New home sales and and the Flash PMI manufacturing index will carry the day in the U.S., while France, Germany, and the broader eurozone will also announce PMI data.