Gold prices are barely lower this morning in early New York trading, while the dollar struggles to recover losses sustained in European trading. European stocks are barely positive, while the FTSE in London is showing modest, post-Brexit gains. The pound gave up marginal gains on the New York open.
Today is the last trading day of the month, the quarter, and the first half of the year. Fund managers will be busy buying and selling as they rebalance their portfolios—”window dressing.” Oil futures are down 2% in early trading, after gaining 4% on Wednesday.
Gold is trading just under yesterday’s spot close of $1,318, bumping into that level from below. Spot gold gained $6.80 yesterday, while August gold futures settled up $9 an ounce.
Technical numbers show support at $1,314 and $1,305. Resistance is at $1,323 and $1,331.
The news out of London this morning reveals that ex-mayor of London, Boris Johnson, has taken himself out of the running for Prime Minister. This something of a shock, as the common wisdom was that he was leading the Leave faction of the Brexit debate so that he could win the Prime Minister’s seat. In a crowded press conference that everyone assumed had been called by Johnson to announce his candidacy, his revelation that he would not run elicited audible gasps from the audience.
This comes after the major power broker of the Leave campaign, Michael Gove, announced early Thursday morning London time that he was withdrawing his support of Boris Johnson to be Prime Minister:
“I respect and admire all the candidates running for the leadership. In particular, I wanted to help build a team behind Boris Johnson so that a politician who argued for leaving the European Union could lead us to a better future.
“But I have come, reluctantly, to the conclusion that Boris cannot provide the leadership or build the team for the task ahead.”
Conservative MP David Davis told BBC Radio 5 Live Mr Gove’s decision must have been taken “very late,” as Mr Gove’s assistant had asked him on Wednesday night to attend Mr Johnson’s campaign launch on Thursday.
August gold futures’ settlement at $1,326.90 an ounce was the highest in 11 months. Spot gold’s close at $1,318.30 was near the low end of the day’s trading range.
Crude prices were higher Wednesday. August WTI futures settled at $49.88 a barrel, up by $2.03. August Brent crude also rose exactly $2.03, to end at $50.61. Oil markets shook off Brexit-inspired fears of a global economic slowdown, as rumors circulated of a possible strike by Norwegian oil workers in the North Sea, and a continued collapse of Venezuela’s oil sector. Sentiment was further boosted by the Energy Information Administration’s US crude stockpile report that showed a 4.1 million barrel draw-down.
The pound inched upward for the second day on Wednesday, as markets began thinking that the invocation of Article 50 in the EU treaty will not happen anytime soon. Article 50 is the mechanism for a member state to leave the European Union. The yuan fell to a six-month low against the dollar on Wednesday, on belief that the Beijing government wants to see a devaluation in their currency.
Stocks on Wall St posted gains for the second day on Wednesday, following oil upward. News that most of the 33 “systemically important” banks in the US passed the Fed’s stress test led to a flurry of activity in the sector. Passing this test means that restrictions on stock buybacks and increases in dividends were lifted. The business wires lit up as all these banks announced stock buybacks, increases in dividends, or both. Major indices climbed an average of 1.7%.
MarketWatch quotes Tyler Richey, co-editor of the 7:00s Report, on the non-correlation being seen between stocks and safe haven assets such as gold and sovereign bonds: “Normally you would expect safe-haven demand to fade in the midst of such a broad stock rally, which is a major warning sign for risk assets currently. Basically, something has to give here between the stock market and safe-haven markets, like gold and bonds, and historically it is the stock market that is the ‘wrong market’.”
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