Stock indices in Europe and the U.S. followed Asian stocks lower this morning as the entire region saw heavy losses on the exchanges overnight. Japan’s Nikkei 225 lost nearly 1%, the Hang Seng index (Hong Kong) slid by more than 3%, Taiwan’s TSEC index fell 2.4%, and Shanghai led the way at a staggering 8.48% lower—the worst single-day loss for the index in over 8 years.
Keep in mind this freefall occurred despite the rule that no individual share listed on the Shanghai exchange can fall more than 10% in a single trading day before it’s frozen. This helped pull European shares nearly 2% into the red this morning while U.S. indices pointed lower, likely tracking into the negative right along with their counterparts around the globe. The precious metals spot prices opened slightly in the red this morning: Gold: -$4 (-0.4%) to $1,096/oz; Silver: -10¢ (-0.6%) to $14.75/oz; Platinum: -$9 (-0.9%) to $983/oz; Palladium: -$3 (-0.5%) to $626/oz.
Yesterday in the Markets
The precious metals advanced modestly on Friday after opening the day slightly in the red. This was seen as a bit of a corrective bounce off strong support for the gold price at the $1,080/oz level, with gold and silver both adding about 0.35% by close of trading. U.S. indices took a beating, with each major index losing about 1%.
Factors Affecting Gold Today
Durable goods order rose by 3.4% in June, which is always a solid indicator of activity in the real economy. However, with the fallout from the ongoing rout in Chinese equities still smarting and the timing of the Fed’s first interest rate hike weighing on investors’ minds, Wall St moved about 1% lower this morning nonetheless. The euro rallied above $1.105 thanks to the dollar sliding below 96.7 on the DXY index, while the yen was firmer. U.S. Treasuries saw fresh demand, with the 10-year note yield dropping to 2.21%.
In spite of their current trend toward bottoming out, the precious metal prices may see a lift as summer progresses and concerns about global economic growth (or the lack thereof) and its impact on the equities markets becomes the main concern of investors. Even if U.S. stocks manage to outperform their international peers (which they have not necessarily been doing of late), the fact remains that this stock market is being disproportionately buoyed by growth in retail and mergers in healthcare; these two sectors account entirely for the S&P 500’s gains in 2015.
Though the outlook for physical bullion demand in the East is more murky, considering how much gold China has already accumulated and that some mainland investors in a bind are probably selling their gold to cover painful losses in equities, retail demand for bullion in the West may be spurred along if stocks continue to suffer.
A number of important indicators come out Tuesday in addition to the Richmond Fed manufacturing survey, including the consumer confidence gauge, the PMI services flash, and the S&P Case-Shiller home price index.