A weaker dollar is helping gold prices and oil futures this morning. Spot gold and December gold futures are both up a little more than $3 an ounce, while Brent crude contracts for October rose above $50 a barrel rose the first time in six weeks.
The minutes of the Federal Reserve Open Market Committee meeting in July were released yesterday afternoon. Gold prices spiked up, then down, within the span of a few minutes before settling in the general neighborhood of its trading range before the news. Prices gained in Asia before drifting slowly lower in Europe.
Silver prices followed nearly the exact same path, with Thursday prices in Asia tracking Wednesday’s trading almost exactly. Spot silver is up modestly, recovering yesterday’s ten cent loss. September silver futures fell 1.1% yesterday, but is up slightly this morning.
Markets at first thought yesterday’s FOMC meeting minutes leaned to the hawkish side, as Fed officials were split on whether to hike benchmark interest rates or not. After further reflection, most analysts decided that the news was a bit on the dovish side after all.
With the dollar’s strength being dependent on an imminent interest rate hike, yesterday’s news sent the greenback to another seven-week low. Analysts at Bespoke Investment Group believe that the reason for the recent dollar weakness goes deeper than that. They expect the US dollar to start a major downturn in the near future, after failing to breach a tough resistance level twice.
Today’s forex action in England isn’t helping dollar bulls. The near-collapse of the British pound sterling in the immediate aftermath of the Brexit referendum helped retail sales in the UK jump by 1.4% in July, compared to a 0.9% drop in June. The weaker pound led to increased tourism and tourism spending, while Brits were convinced by the nice weather to by summerwear. The news helped the pound rise to a two-week high today.
Weakness in the US dollar last month led to a stronger yen, much to the frustration of the Bank of Japan. Japanese exports fell 14% last month, the worst one-month drop since the dark days of 2009. This makes the tenth month in a row that Japanese export levels have fallen.
A surprise drop in the number of newly-fired workers last week failed to give the greenback any relief. First-time jobless claims fell by 4,000 to 262,000 applications. Economists were expecting claims to stay nearly flat at 265,000.
The Fed news helped stocks recover from midday losses, with the Dow closing up almost 22 points, the S&P 500 adding 4 points, and the Nasdaq gaining 1.55 points.
Oil futures rose dreams of an OPEC production cut and a surprise draw-down in US crude stockpiles to a fifth day of gains. Prices were assisted yesterday by the weaker dollar. Oil prices have been extremely volatile recently, moving from highs for the year in June to fall more than 20% by the beginning of this month. West Texas Intermediate crude has gained nearly 13% in the last week, following rumors that OPEC may agree to a production freeze next month.
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