Gold prices are in correction mode this morning, after hitting fresh 28-month highs overnight. Silver is also lower, falling beneath $20 an ounce. Upbeat private sector payrolls and first-time jobless claims reports led Wall St. to open moderately higher. ADP reported that private sector payrolls rose by 172,000 jobs in June, beating expectations of 159,000. First-time jobless claims fell by 16,000 for the previous week, with 254,000 newly unemployed people filing for claims.
Today we see support for gold starting at $1,358 an ounce, with the next support level at $1,338. Resistance will first be seen at $1,364, with $1,373 being the next line in the sand.
On the currency markets, the dollar is trading flat, as this morning’s upbeat employment data has been unable to move it. The euro is also flat. The British pound sterling has halted its free-fall, if only temporarily. The ever-stronger yen is proving to be the Bank of Japan’s Godzilla, as nothing they do can stop it. As a result, Japanese stocks are being pushed lower. Their only hope is that safe haven demand begins to ease.
Stocks are generally higher today, especially in Europe and the UK. The two major exceptions are the Shanghai and Tokyo exchanges.
Oil is also gaining, building on a 1.8% gain for both Brent and WTI yesterday.
And Then There Were Four
The British financial sector was rocked yesterday, as a fourth large real estate fund “pulled up the drawbridge” and stopped accepting redemption requests on two of its funds. This makes six real estate funds in total that have stopped trading this week, accounting for more than half of the total holding the UK real estate investment sector. Liquidity in the UK real estate market, which was struggling against falling prices before this recent rush for the exits, is at crisis levels.
Gold futures hit another two-year high on Wednesday, gaining $8.40 to settle at $1,367.10 an ounce. September silver futures gained 1.5% to settle at $20.20 an ounce to extend its rally to six days. Wednesday’s settlement is the first time that silver futures have closed above $20 since August 2014.
Spot gold gained $7.00 to close at $1,363.20, near the middle of Wednesday’s trading range, for a gain of 0.52%. Spot silver prices gained 14 cents to close at $20.06, close to the session high.
Famous fund manager Jeffrey Gundlach advised investors yesterday that gold remains the best investment in these shaky, dangerous times. Calling the European banking system “heading toward insolvency,” he remarked “Banks are dying and policymakers don’t know what to do,” Gundlach said. “Watch Deutsche Bank shares go to single digits and people will start to panic.”
Crude futures, which closed up 1.8% Wednesday, shot up another 1% in after-hours trading on the release of the US petroleum stockpile report from the American Petroleum Institute. The API announced a much larger than expected 6.7 million barrel drawdown for the week ending July 1st. The real tale of the tape will occur this morning, when the US Energy Information Administration releases official numbers. Recently, the API report has had a habit of wildly missing the official numbers.
Bonds of major nations saw their yields inch up from all-time lows after Wednesday’s release of the June FOMC meeting minutes.
Central Bank Minutes – No Surprises
The release of the minutes from the Federal Reserve’s June policy meeting was met mostly by indifference. They same can be said for the release this morning of the minutes from the European Central Bank’s last policy meeting. Both banks signaled a “stay the course” approach, especially until the fallout from the June 23rd Brexit referendum can be ascertained.
The ECB maintains that there hasn’t been enough time yet for their most central stimulus measures to take effect, while the Fed is waiting for job growth to resume in the US.
Data released today shows that the Chinese government bought 480,000 troy ounces of gold last month, putting their official total at 58.62 million ounces, about 1823 metric tons. Many analysts believe that the actual amount of Chinese gold reserves is at least double the reported figure.
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