Gold prices were sharply higher this morning, as global markets go into defensive mode on fears that Deutsche Bank (DB) will fail. These fears are sharpest in Europe, where it is (rightly) feared that DB’s failure would bring the EU banking system down with it.
At 10am, gold was trading at $1,322.20 an ounce, down from $1,329.90 ounce on profit taking. Spot gold is still up $2.30 for the day. December gold futures are down $3.80, after gaining $2.30 yesterday. Silver was quoted at $19.48 an ounce at 10am in New York, also down from morning highs. Spot silver is still up more than 2%, with a 38 cent gain. December silver futures are up 29 cents.
The SPDR Gold Trust (GLD) is coming down from morning highs, after losing 0.1% Thursday. The iShares Silver Trust (SLV) saw a big spike this morning, after shedding 0.4% yesterday. Even after retracing half of this morning’s gains, SLV is still over 1% higher. The VanEck Market Vectors Gold Miners ETF (GDX) is down slightly, after losing 0.9% in the previous session.
The US dollar was flying high this morning, as the euro and British pound sterling were pressured by contagion fears in the European banking sector should Deutsche Bank collapse. London’s role as the world’s financial center gives it extremely high exposure to European banking crises. However, a mixed bag of economic news in the US prevented the greenback from breaking through resistance, dropping it back to near unchanged.
US oil futures are working on a third day of gains this morning, targeting the $48 barrier. West Texas Intermediate crude for November settled at $47.83 yesterday, up 1.7% and the highest close in a month. This follows a huge 5.3% gain Wednesday, after the OPEC press release that announced that oil production talks are moving forward.
November Brent futures are lower after settling with a 1.1% gain on Thursday. The November contract expires at the end of trade today. December Brent futures becomes the front contract, trading at $49.95 a barrel compared to the expiring November contract at $49.10.
Deutsche Bank has once again taken center stage on world markets, a day after Wells Fargo CEO John Stumpf faced a very hostile House Financial Services Committee on Capitol Hill. Reports that several large hedge funds had either reduced their holdings or cashed out entirely on their DB positions sent shockwaves through the financial sector, and started talk of a run on the bank.
Deutsche Bank share prices fell more than 9% in Europe, breaking below the extremely important psychological €10 level before recovering somewhat. Hedge funds that have shorted DB stock this week made out very handsomely on today’s price crash.
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