Gold Testing New 27-Month Highs

July 6th, 2016 by

pile-of-gold-rallyGold prices rose more than $20 an ounce in overnight trading, only to give back roughly half that in New York on some understandable profit taking. A rare bit of sunny economic news in the form of the ISM services index, which beat estimates, help ease jitters over the US economy.

Even after easing, gold is at a more than two-year highs. UBS analyst Joni Teves wrote today that “Gold has likely entered the early stages of the next bull run.” The silver spot price is back above $20 an ounce, after closing down nearly 2% on Tuesday.

Technical forecasts for gold today seen support at $1,367, then at $1,356. Resistance is at $1,375, then $1,380.  Silver should see support at $19.76, then $19.59. Resistance stands at $20.23 and $20.58.

Most stock markets have either finished in the red, or are currently in the red this morning. The notable exception is the Shanghai exchange, which logged a 0.36% gain.

pound-burningThe poor pound is getting another drubbing today, fueled in part over fears of a European Lehman Moment. The British currency hit a new 31-year low against the dollar, and a nearly three-year low against the euro. Some currency traders are predicting pound parity to the euro by the end of the year. The yen is once again the safe haven leader among currencies today.

In the bond market, Japanese 20-year bond yields fell into negative territory for the first time ever, while the US Treasury 10-year note saw its yield fall to a new all-time record of 1.318% this morning, before giving back some gains.

Speculators piled into bullish bets on gold last week. For the week ending June 28, the CFTC reported long positions on gold at the highest level since records began in 2006.

Tuesday’s Markets

Plunging bank stocks and economic uncertainty in the UK and European Union helped shepherd August gold futures to a 1.5% gain, settling up $19.70 to $1,358.70 an ounce. September silver futures added 31.9 cents, climbing 1.6% to settle at $19.90 an ounce. This was well off its overnight highs of over $21 an ounce, and is perhaps signalling that it’s time it took a breather after recent jaw-dropping gains.

Spot gold closed $5.70 higher to close at $1,356.20, near the intraday high. Spot silver closed down 40 cents, a drop of 1.97%, to end at $19.91.

Treasuries saw heavy safe haven demand, with the yield on the 1-yr note falling to new all-time lows under 1.36%.

Wall St. followed European and Asian stocks lower, as the DJIA broke a four-day rally. The ended 108 points lower to 17,840. The S&P 500 shed 14 points to close at 2,088, and the Nasdaq slid 39 points to close at 4,822.

UK-downBank of England Governor Mark Carney gave a sobering assessment of Britain’s economic health Tuesday, telling reporters “The UK has entered a period of uncertainty and significant economic adjustment. The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds.” He noted that the BoE’s move Tuesday to lower the capital requirements for banks, which frees up more money that they can lend, will only work if people and businesses actually want to borrow.

Carney’s speech greased the skids on an already-falling pound sterling, as it dropped to yet another 31-year low. The euro also fell, while the yen logged another day of gains on safe haven demand. The US dollar broke into the black early in New York, to end 0.5% higher on the DXY index of a basket of currencies.

housing

The news that three large commercial real estate firms have stopped honoring redemptions has sent shockwaves through the UK financial sector. The three funds, holding a total of $11.8 billion in real estate, had burned through the cash kept on hand for redemptions as the number of investors fleeing the market in the days after the Brexit vote grew to a tidal wave. The UK commercial real estate market has been widely seen as overvalued.  With the market already in a downturn due to Brexit, the funds will have no choice to sell at a loss. This increases the chance that they will collapse, as redemptions grow.

Oil futures fell sharply, as Brexit-fuelled fears of a global economic slowdown dampened expectations of any growth in oil demand. August WTI contracts fell 4.9% to settle $2.39 lower at $46.60 a barrel. August Brent contracts shed $2.14 a barrel, 4.3%, to end at $47.96

 

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product