Precious Metals Fall As Inflation Picks Up

November 30th, 2017 by

The markets awoke to a string of gold-negative news on Thursday, from higher inflation to a drop on jobless claims. Spot gold lost almost $4 (-0.3%) early in the session, trading at about $1,280 per ounce. Silver prices tumbled 12¢ (-0.7%) to $16.39/oz, its lowest in nearly four months. The Platinum Group Metals saw less action, as platinum was steady around $943/oz and palladium continued to trade just a hair above $1,000/oz.

One of leading factors in the declines for the precious metals was a report from the Department of Commerce that showed a measure of personal consumption expenditures (PCE), a measure of core inflation, rose 1.4% during October. Although this continues to fall well short of the Fed’s 2% goal, it represents a slight acceleration in price inflation. The same report indicated that consumer spending cooled off during October.

Stocks in the U.S. opened slightly higher after a mixed performance on Wednesday. The Nasdaq lost 1.3% while the Dow Jones inched to a new all-time high. Meanwhile, the S&P 500 was essentially flat. Nasdaq futures hinted as a rebound for the tech sector during today’s session. However, investors seem to be switching out of technology stocks in favor of financials and other firms that are expected to benefit most from the proposed tax cuts being debated in Congress.

The Labor Department also released fresh data on Thursday. Weekly jobless claims fell by 2,000 to 238,000 new claims. With this consistent strength of the labor market and the gradual rise in inflation, markets are currently pricing in 90% odds of a December rate hike by the Federal Reserve.

Shares in Europe edged higher this morning while stocks were mixed in Asia. Shanghai and Hong Kong slumped while the Nikkei in Japan rose to a three-week high. Elsewhere, the main index in Caracas, Venezuela jumped 37% during trading yesterday. Unbelievably, the Venezuelan bolívar has fallen a staggering 3,000% against the USD year-to-date as the country struggles to pull its economy out of a deep recession.

Overall, global equities have posted gains in each of the first 11 months of this year. This consistent “melt-up” has some investors worried that a pullback could be imminent: Goldman Sachs is making the case that valuations across markets are, relatively speaking, at their highest in more than a century.

The dollar trickled lower against a basket of its peer currencies, falling to 93.05 on the DXY index. The British pound was the biggest beneficiary as sterling rose above $1.34 on the foreign exchange markets. The 10-year Treasury yield eased back to about 2.40%. After losing ground yesterday, crude oil rebounded on Thursday morning. WTI crude added 0.8% to trade above $57.75 per barrel.

Today is last trading day of November. This means monthly options are set to expire, so volatility may pick up during today’s session.

 

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.