With markets in both London and New York closed for the long Easter weekend, gold prices are taking a breather. New York markets will be open on Monday, but London is making it a four-day weekend.
Gold, oil, and stocks all were hammered by a raft of hawkish interviews by four regional Fed presidents over the last couple of days that sent the dollar higher. The purpose of the talks were to increase market expectations of a possible interest rate hike next month. Odds for an April rate hike by the Fed, according to the CME Group’s FedWatch tool, are up to 12%. The odds of a June hike are now 41% and 55% for a July hike.
Gold futures logged another weekly loss in an abbreviated week of trading. April gold lost $2.40 to settle at $1,221.60 an ounce. Spot gold fell $3.20 to close at $1,216.40, not far above the session low of $1,215.60. We have no technical numbers today, because the markets are closed.
Nymex oil futures were down over 4% at one point yesterday, but recovered to post a modest 0.8% loss. WTI closed down 33 cents at $39.46 a barrel. Brent futures contracts for May were almost flat, giving up a tiny 3 cents to close at $40.44 a barrel. Prices were helped by news that the US oil rig count fell by 15 wells last week.
The stronger dollar broke the S&P 500’s five-week weekly winning streak. The index closed just below unchanged on Thursday. This extended the index’s losing streak to three days. The Dow was up a tiny 0.08% Thursday, while the Nasdaq added 0.1%, but both also ended with a small weekly loss.
Fourth quarter 2015 GDP was revised upward for the second time, reports from the Commerce Department show this morning. Analysts were expecting the rate to stay at 1.0%, but it was bumped up to 1.4% on stronger consumer spending. This compares to 2.0% for the third quarter, and 2.4% for all of 2015.
Corporate profits in the fourth quarter plunged at an annual rate of 8.4%, mainly on the $20.8 billion judgement against BP for the Deepwater Horizon oil spill in the Gulf of Mexico. Corporate profits were down 5.1% for all of 2015, compared to a -0.6% for 2014.
The stronger dollar is hurting not just commodities and stocks in the developed world, it’s having a large negative effect on emerging markets. The greenback has had its best week since November, after falling to a nine-month low after the March FOMC meeting. While a raft of hawkish Fed speeches certainly helped the dollar’s rally, perhaps the largest factor can be summed up as “Brexit and Brussels.”
The pound sterling has logged the worst performance among all developed nation currencies, down 4% year to date. This is over fears that the UK will vote to leave the European Union in a referendum scheduled for June 23. The euro is lower on worries about follow-on effects from the terror attacks in Brussels, and as Belgian police engage in more firefights with suspected terrorists. The common currency was already in decline over concerns that the ECB’s stimulus measures were not enough to revive the economies of member nations.
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