A softer dollar this morning is boosting precious metals, as markets enter the last two trading days of the year. Spot gold prices are modestly higher around the $1,145 mark, after hitting $1,150 an ounce overnight. Spot silver is marginally higher in New York, after giving up most of its overnight gains.
Wall St opened flat this morning, a day after seeing significant declines that push the Dow further away from its goal of reaching 20,000 before the end of the year. The S&P 500 saw its worst one-day drop since October 11, after a short-selling fund spooked investors in computer graphics chip maker Nvidia. The company’s shares had hit a record high earlier in the week. The Dow and S&P were also dragged down by news that Delta Airlines had cancelled a $4 billion passenger jet order with Boeing.
The dollar gave back all of yesterday’s gains this morning, after closing at 103.3 on the DXY dollar index. The dollar is hovering back around yesterday’s open of 102.9. Talking about weakness in the dollar the last few days of the year is relative to the very short term. A year ago today the DXY closed at 98.1. Gains in the dollar, which accelerated after Donald Trump won the presidential election, has pressured commodities in general.
That stronger dollar continues to hurt US exports, and the companies that have avlarge foreign sales presence. US exports of goods fell by $1.2 billion in November compared to October, while imports rose $2.2 billion. This widening trade deficit may become a larger drag to the overall economy, as well as for stocks.
The stronger dollar couldn’t hold gold prices down, as February COMEX gold futures managed to rip a $2.00 an ounce gain to end at a two-week high of $1,141 an ounce. Silver futures managed a gain of five cents, which put it up over the $16 mark at $16.04.
In the spot market, gold closed near the top of the day’s trading range on Wednesday, at $1,141.70. Spot silver managed to eke out a gain of three cents, ending the day at $15.98 an ounce.
Treasuries gained yesterday in a turnabout in fortunes from Tuesday’s losses. Bond prices fell Tuesday after a tepid response to a $26 billion auction of two-year Treasury notes, but reversed higher yesterday on investor demand in an auction of $34 billion worth of five-year Treasuries.
The yield on the benchmark 10-year Treasury note fell to a two-week low as demand increased, while the yield on the 30-year bond fell to its lowest point since December 8th. Some traders are starting to express concerns that the sell-off in bonds has been substantially over-done. Prospects of massive deficit spending by the incoming Trump Administration have sent inflation predictions soaring and bond prices falling. The debt-averse Tea Party Republicans in the House of Representatives are likely to oppose growing the Federal debt even faster.
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