Gold prices dropped at the start of trading in New York this morning, as the dollar surged and oil prices fell. Traders cut their positions in gold after Hillary Clinton’s performance in the first presidential debate of the 2016 election cycle. The common consensus on the trading floor is that Clinton won the first debate, quelling fears of disruptive political policies from a Trump presidency.
At 10:30am in New York, gold is trading at $1,325.80 a ounce. December gold contracts are trading $18.30 lower, while spot gold is down $12.10. Silver is trading at $19.21. December silver futures are showing a 38-cent loss, while spot silver is 20 cents lower. Losses have accelerated after a big jump in US consumer confidence to a post-recession high.
Gold saw the lowest volatility in nearly two years yesterday, on thin volume ahead of Monday night’s presidential debate. Gold futures end up $2.40 to settle at $1,344.10 an ounce, Spot gold ended practically flat, giving up 80 cents to close at $1,336.30. Silver futures fell 21 cents for a 1.1% loss Monday, settling at $19.59 an ounce. Spot silver shed 32 cents (1.65%) to close at $19.35.
The SPDR Gold Trust (GLD) gained 0.2% yesterday after a Bloomberg report showed that bullion levels at the gold-backed ETF were steady at 2,030.6 metric tons.
Discounting the IMF, if GLD were a country, it would rank #5 in the world for gold reserves, more than China (1,828.6 mt), Russia (1,506 mt), or Switzerland (1,040 mt) (data from World Gold Council – September 2016 Official Gold Reserves).
The US dollar fell 0.2% against a basket of currencies Monday. Most of that loss was due to the ever-strengthening yen, which has taken over as the preferred safe haven currency. The dollar jumped at the New York open this morning, riding the same risk-on sentiment after last night’s presidential debate that has gold prices lower. The Mexican peso is being touted this morning as a barometer of the odds of a Clinton presidency. The peso sank to a record low at the start of the presidential debate, but later rose by the most of all emerging market currencies as Clinton was perceived to have won the contest.
Stocks were down nearly 1% on Wall St yesterday, as a collapse in banking stocks combined with trepidation over the Clinton-Trump debate. The Dow, S&P 500, and Nasdaq closed down 0.9%.
The global rout of bank stocks was triggered by the continuing free-fall in Deutsche Bank’s stock price. The largest bank in Europe saw its share value plunge by 7.1%, to hit an all-time low. The bloodletting has continued this morning, as the BBC reports that DB stock was down another 3% in early trading in Europe.
Market jitters that saw the yen make gains yesterday, also lifted the bond market. Unease over the presidential debate and likely breakdown in oil talks in Algiers were magnified when Bank of japan governor Haruhiko Kuroda said that he had no problem pushing benchmark interest rates even lower into negative territory.
The 10-year Treasury note saw its yield drop three basis points to a three-week low of 1.58% on investor demand. The yield on the 30-year Treasury also fell to a three-week low. The German 10-year bund saw its yield end 3.7 basis points to settle at -0.114%. The Finnish 1-year bond traded at a negative yield for the first time in history yesterday, while the Spanish 10-year yield also saw a record low.
Oil prices are more than 2% lower this morning, after jumping more than 3% yesterday (and losing 4% on Friday). The extreme volatility is from speculators trading on rumors coming out of the oil ministers three-day meeting in Algiers. Yesterday, markets were boosted by the Algerian oil minister saying that negotiations this week could result in a production freeze. However, reports this morning show that Iran is now in the driver’s seat when it comes to production quotas. Tehran is refusing to freeze its crude output until it raises production levels to over 4 million barrels a day. Since Saudi Arabia refuses to back any production freeze unless Iran signs on, this gives Iran “veto power” over any agreement. The Saudis have even pledged to cut production by 500,000 to 1 million barrels a day (according to which rumor you hear) if Iran will get on board with the rest of OPEC.
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