Reversals in both gold and silver were triggered overnight in Asia, where early losses brought the bargain hunters out in droves. Both precious metals were back in the green in a matter of minutes. Gold made it back to the mid-$1,340s in Europe, while silver climbed to the $20.40 range. Spot gold prices are up nearly $10 an ounce this morning in New York. Spot silver prices are up over 1%.
Oil is down slightly after gaining over 4.5% on Tuesday. Prices are being pressured by an International Energy Agency warned that record output by OPEC has led to crude stockpiles among member states to exceed 3 billion barrels.
Stocks opened higher on Wall St., but went into consolidation mode almost immediately. Stocks in Europe are slightly positive. The British pound is gaining this morning, as the UK finally has a leader. The euro is steady against the dollar, while the yen is dropping ahead of expected stimulus measures by the Bank of Japan.
Technical analysis shows gold support at $1,339 and $1,335. Resistance is found at $1,344 and $1,350. Silver should see support at $19.95 and $19.75, with resistance at $20.67 and $21.00.
Spot gold closed near long-term support at $1,332.70 Tuesday, losing $21.90. August gold futures shed $21.30 to settle at $1,335.30. Prices bottomed out shortly after noontime yesterday, keeping to a tight $1,330 – $1,335 range into the close. Spot gold lost $32.70 the first two days of the week, while gold futures fell $23.10.
Spot silver prices, which managed to dodge losses on Monday, ended 14 cents lower at $20.12. September silver futures lost 13 cents to settle at $20.17. Spot silver has lost 13 cents over the first two days of the week, while silver futures have gained 7 cents.
Wall St. continued to rally Tuesday, amid dreams of central bank stimulus from Japan and the UK. The Dow and the S&P 500 both put record highs in the books, while the Nasdaq finally made it into positive territory for the year. The FTSE closed near an 11-month high as the British leadership question was resolved. It’s amazing the difference having someone at home at 10 Downing St. makes to the British markets.
Oil futures jumped up from Monday’s two-month low. August WTI settled 4.6% higher, at $46.80 a barrel. September Brent futures settle up 4.8%, at $48.47. Prices were helped by news of another attack on oil facilities in Nigeria, and reports that exports from Iraq had been delayed due to a pipeline leak.
Tuesday’s Treasury auction of 10-year notes was less than a success, with demand down sharply. This led yields higher by over 9 basis points, as bonds were dumped to pump more money into stocks. This was the largest one-day jump in yields since May, and worst two-day performance for the year.
Jeffrey Gunlach this morning calls this chase for yield a “mass psychosis.” He predicts that the European response to all the failing banks will be “bond unfriendly,” and will surprise the ECB with unexpected inflation.
The dollar was unable to take advantage of a plunging yen, spending the entire day in the red. The pound gained more than 2% Tuesday, as Brexit jitters subsided. The yen has fallen at its fastest rate since 2014 over the last two days
London is feeling fine, as the nation is no longer leaderless or rudderless. Theresa May is set to become Prime Minister of the United Kingdom today. One of her first acts will be to appoint a “Brexit czar” to coordinate activities in preparation for the invocation of Article 50 of the Treaty of European Union. Also in London, the policy committee of the Bank of England meets to decide whether or not to cut interest rates for the first time since 2009. Everyone is expecting the rate cut, as BoE Governor Carney is known for his quick reaction to the 2008 global financial crisis when he helmed the Bank of Canada. This has been a major factor in the recovery of the British stock market.
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