Gold Below $1,200 on Durable Goods

November 23rd, 2016 by

The dollar is sharply higher this morning, as durable goods orders for October were reported to have risen by 4.8% compared to the previous month, nearly triple the 1.7% gain that experts expected. Meanwhile, the skyrocketing dollar pushed gold prices below the important $1,200 per ounce level, triggering sell stops. Spot gold was down $20 an ounce in early New York trading. Silver prices are also sharply lower, with spot silver trading more than 2% lower.

Stocks Take Breather

Stocks are slightly lower in New York this morning, as traders book profits and cut exposure ahead of what is essentially a four-day Thanksgiving weekend. Nonetheless, stocks have been—in the timeless words of the late pop star Prince—quite literally “partying like it’s 1999.” The Dow Jones Industrial Average closed above 19,000 for the first time ever yesterday, joining the S&P 500, the Nasdaq, and the Russell 2000 indices in hitting all-time highs. The last time all four of these stock indices closed at record highs in the same session was 1999, just before the unraveling of the tech bubble. Of course, such high valuations should be a warning sign to investors who risk potentially jumping on the bandwagon at the top of the rally.

Dollar Dominance

Despite Wednesday morning’s breather for equities, the dollar surged above 101.6 on the DXY dollar spot index, notching another new 13-year high. This was due at least in part to the release of durable goods orders in the U.S. on Wednesday morning that showed a sharp increase above analysts’ expectations. With most traders convinced that the Federal Reserve Open Market Committee (FOMC) will indeed hike interest rates at the group’s December meeting, the prospects of even stronger dollar will likely continue to weigh on gold prices.

Durable goods orders were lifted by commercial aircraft orders, which soared 94.1% in October. Boeing announced that it had received 85 orders for aircraft last month, compared to 55 orders in September.

International News

Wholesale prices in the European Union as a whole came in this morning at 54.1, the highest reading in 11 months, and solidly into expansion territory. (A reading above 50.0 represents expansion.) Similarly, EU manufacturing PMI hit a 34-month high of 53.7.

After stocks in Europe and Asia tracked their counterparts in the U.S. higher on Tuesday, the landscape was much more mixed heading into the Thanksgiving holiday. Amid muted trading volumes, European indices were mostly in the red on Wednesday. Japan’s Nikkei 225 closed a modest 0.3% higher overnight. The Shanghai Composite index lost about 0.2% while the Hang Seng (Hong Kong) was essentially flat.

 

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