Gold prices are seeing support from a weaker dollar, as spot prices trend near ten-month lows hit on Friday. Silver prices are seeing modest gains this morning, with prices back above $17 an ounce. The big news this morning is a successful agreement between OPEC and select non-OPEC oil producers to cut production. The resulting boost to oil prices is expected to increase inflation pressures across the globe.
Gold closed Friday at its fifth weekly loss in a row, as the stock market frenzy continues. Silver managed to eke out a weekly gain of approximately 1%, despite losses on Friday. Spot gold closed $10.80 lower Friday, ending at $1,159.60. February gold futures settled $10.50 lower, at $1,161.90. Spot silver lost 18 cents to end at $16.82, while March silver futures lost 13 cents to $16.97.
Wall St is taking on the appearance of a massive Super Bowl party to start the week, as the Dow Jones Industrial Average is within striking distance of 20,000. It closed Friday only 244 points away from the massively important record. The nearly five-week rally has seen different sectors gain, as buyers rotate from one sector when it overheats to those that haven’t risen as much.
For example, financial stocks had a huge run as the odds of an interest rate hike by the Fed approached 100%. Now that event has been “baked in” to bank prices. OPEC’s efforts to forge a world-spanning deal to reduce oil production has sent oil prices leaping, benefiting not only the energy sector, but the financial sector. Higher oil means higher inflation, which is good for bank profits.
US shale companies are already tooling up to take advantage of these production cuts. Baker Hughes reported Friday that the active rig count increased by 21, to a total of 498.
The OPEC/non-OPEC deal reached Saturday has lifted battered emerging market currencies to big gains this morning. The Russian ruble has been one of the bigger beneficiaries of the rally.
The US dollar has eased to near the 101 line on the DXY index this morning, as it loses ground to all major competitors (the euro, British pound and Japanese yen). Traders have been cautioning that the USD is in overbought territory, so a pullback immediately before the Fed open market committee (FOMC) meeting is not surprising.
Bonds in major economies are still selling off, as safe havens of all types are jettisoned in order to go all-in on stocks. The 10-year US Treasury note saw its yield rise above 2.5% for the first time since October 2014.
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