While the rest of the precious metals were largely steady on Wednesday morning, spot gold surged higher yet again. Gold withstood a bout of profit-taking early this morning that sent the yellow metal down to $1,244/oz before recovering to $1,249/oz, up 0.35%.
Spot silver didn’t fare quite as well, losing about 2¢ per ounce (-0.1%) to trade shy of $17.55/oz. Palladium added 0.75% while platinum was flat.
Shift in the Markets
It makes sense that some traders took profits on their gold positions this morning. The metal has advanced $50 per ounce (better than 4%) in less than two weeks. Yet this action was not enough to counteract the strong demand that gold is receiving as sentiment is appearing to shift from risk-on to risk-off on Wall St.
The U.S. stock market saw its biggest sell-off of 2017 yesterday, suffering its worst single-day performance year-to-date. It was the first time the S&P 500 has lost more than 1% in one trading sessions since October, and was in fact the worst day for equities since President Trump took office in November. Most market watchers shouldn’t have been caught off-guard, however: bank stocks had been up as much as 32% since Election Day and were unlikely to sustain such a rally all year long.
The so-called “Trumpflation” trade that has buoyed stocks may be losing momentum as the “repeal-and-replace” healthcare bill (known as the American Health Care Act, or AHCA) is sputtering through Congress. This could delay and perhaps endanger the president’s other initiatives on taxes and infrastructure spending, as well. The losses on Wall St dragged down equities across the globe. Japan’s Nikkei 225 led the nosedive, tumbling more than 2% lower.
This general scenario is bullish for safe-haven assets. In addition to the increased interest in gold, demand for Treasurys has likewise jumped. The 10-year T-note yield fell to 2.42% this morning, a three-week low (meaning a three-week high for bond prices). Crude oil prices continued to fall again Wednesday, losing over 1% in early trading. Cheaper oil is putting a damper on inflation expectations. The economic environment could remain supportive of higher gold prices even in the absence of significant inflation if faith in the stock-market rally wanes.
Despite shares trading lower in Tokyo, the Japanese yen gained against the dollar for the seventh straight session, firming to a four-month high of about ¥111 per USD. Against a basket of major currencies, the dollar was just below unchanged at 99.8 on the DXY index thanks to slight losses for the euro and pound sterling.
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