Gold Prices Ease In Risk-On Market

September 28th, 2016 by

gold rallyGold prices are modestly lower this morning, on continuing risk-on sentiment in global equities markets. The causes for this risk-on attitude are generally thought to be Hillary Clinton’s successful debate performance, and a fresh round of assurances by Deutsche Bank CEO John Cryan that the German megabank would not need a government bailout.

Gold and silver are both extending yesterday’s losses due to the rally in stocks. At 10am in New York, gold is trading at $1,323.40 an ounce. December gold futures are $7.00 lower, while spot gold is down $3.60. Silver this morning is trading at $19.04 an ounce, putting December silver 13 cents in the red, and spot silver 8 cents lower.

The SPDR Gold Trust (GLD) is also down for a second day, after closing 0.8% down on Tuesday. The slide in the iShares Silver Trust (SLV) is slowing, after a 1.6% loss yesterday. The VanEck Gold Miners ETF (GDX) is almost flat after dropping 1.2 in the previous session.

bankBank stocks are getting a boost for a second day from a surging Deutsche Bank. Germany’s largest bank, it had recently been identified by the IMF as the bank most likely to cause a global financial crisis.  Thought to be close to imminent collapse as recently as Monday, assurances by bank CEO John Cryan that the bank did not need a government bailout helped ease fears. In a speech yesterday in the US, the #3 man at the Justice Department hinted that the recently-levied $14 billion fine against Deutsche Bank could be reduced, depending on how much the bank cooperated with investigators. This was enough for DB’s stock to rally 0.6% for the day.

News this morning that DB had sold off a major asset in the UK was the signal investors needed to restore confidence for a second day. Apparently oversold by speculative shorts, the stock is now attracting bargain hunters whose jitters have been soothed over the last two days. This rally will lead to a round of short-covering, as the stock is up more than 3% in Europe and 2.75% higher in New York.

Disappointing news from the oil ministers’ meeting in Algiers has oil prices falling for a second day. Russia’s oil minister, who had been the mediator between Saudi Arabia and Iran in production freeze negotiations left the conference a day early yesterday, pretty much sinking iran-saudiexpectations of a breakthrough agreement this week to battle the swelling global oil glut.

This was despite a softening of Saudi Arabia’s stance regarding the distressed smaller OPEC producers. The new Saudi oil minister, Khalid al-Falih, told reporters yesterday that Iran, Nigeria and Libya should be allowed to “produce at the maximum levels that makes sense” while the big players freeze,or even cut production.

West Texas intermediate contracts for November ended at $44.67 a barrel Tuesday, losing $1.26 (2.7%) November Brent futures lost $1.38 (2.9%) to $45.97. This morning has seen a reversal in prices. Oil prices are climbing as the US Energy Information Administration surprises analysts with another report showing an unexpected draw-down in oil stockpiles. The EIA said that stockpiles were down 1.9 million barrels, against expectations of a 3.2 million barrel gain.

This is the fourth week in a row that crude stockpiles have shrunk while market watchers expected an increase.

 

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