Precious Metals Break Sideways Pattern

March 21st, 2017 by

gold bars

Tuesday morning began as a rather dull one for the precious metals, with mostly sideways action in trading. Gold prices have remained stuck in neutral the past several sessions, hanging out in the $1,230/oz to $1,235/oz range. By 10 am EST, however, the yellow metal had risen about $4 per ounce to finally break out to nearly $1,240/oz. Spot silver likewise jumped after having hardly budged from Friday’s levels, trading 0.8% to $17.55/oz. The Platinum Group Metals were also mostly flat, with platinum and palladium trading near $970/oz and $790/oz, respectively.

Holding Steady

Stock futures were mixed ahead of the U.S. open, though Wall St was 0.2% higher in early action. The three major indices all seem to be catching their breath as they sit just shy of all-time highs. The Dow Jones, S&P 500, and most recently the Nasdaq have all repeatedly set new record-high intraday and closing numbers since last November.

The dollar continued to slide on Tuesday, falling below 100.0 on the DXY index for the first time since early November, a fresh five-month low. This was mainly due to the strength of the euro. The common currency is at its highest level against the dollar in a month. Investors were reassured by polling forecasts that show anti-EU candidate Marine Le Pen trailing Independent Emmanuel Macron after a televised presidential debate in France. Macron is seen as the less disruptive candidate.

brexit-1462470589paa

The dollar also lost ground against the British pound sterling, which was near a one-month high above $1.24. Sterling was supported by data showing that the inflation rate is currently exceeding 2% in the U.K., which has been one of the Bank of England’s primary goals. Yet, with the looming Brexit negotiations about to be set in motion when Prime Minister Theresa May invokes Article 50 of the EU charter, there is still some fear that Britain may suddenly find itself dealing with much higher inflation after years of severe disinflation.

Meanwhile, Treasurys reversed two consecutive sessions of buying interest that drove the 10-year yield down nearly 10 basis points. The 10-year note yielded 2.49% as of Tuesday morning.

In terms of monetary policy, this week sees a “steady string” of Fed officials speaking to the public. After meeting market expectations by raising interest rates at its March meeting, the Fed is projecting two or three more rate hikes before 2017 ends, which would bring the year-end fed funds rate (and effectively interest rates for the whole country and banks around the world) to a target of about 1.75%. Elsewhere, central bank meetings will be held across the South Pacific this week—in New Zealand, the Philippines, and Sri Lanka.

The latest political news that could upset the quiet around the markets was the White House announcement of new rules for flights from Central Asia. In addition to the temporary travel on people from several countries in the Middle East issued through an executive order by President Trump, now travelers flying to the U.S. from eight predominantly Muslim countries will be restricted from bringing laptops, tablets, and presumably other similar electronic devices on the plane. Such devices are not prohibited outright; they simply must be checked with luggage, a security measure recommended by the Department of Homeland Security, among other federal agencies.

 

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.