Thanks to a disappointing reading of manufacturing on Friday morning, gold prices advanced $6 (+0.5%) to just shy of $1,260/oz. This snaps nearly a week of losses for the yellow metal. Spot silver added 1% (+16¢) to cross back above $16/oz.
Platinum managed to hold steady above $880/oz but has traded below the $900 threshold for the past week. Palladium slipped $5 (-0.5%) this morning but held onto most of yesterday’s gains, trading near $1,020/oz.
The Empire State manufacturing index, which has risen for much of the year, pulled back for the second consecutive month in December. The reading came in at 18.0, which still indicates expansion, just at a slower pace than earlier in 2017.
Manufacturing has gotten a boost from the weakness of the dollar, as a weaker currency effectively makes imports cheaper for buyers overseas. The USD traded slightly higher at 93.55 on the DXY index, but is down from its weekly highs. The softer dollar has been a consistent theme all year: Year-to-date, the dollar has lost 8.5%. By comparison, gold has still gained 11.5% from where it began the year—even in spite of its year-end losses.
Congress is nearing finalization of its big tax bill after weeks of debate. However, both the Federal Reserve and outside economists are warning that the economic boost from tax cuts may be short-lived given that the markets have already priced in much of the expected benefits. The same logic applies to the continuing trend of rising interest rates in the U.S. and around the developed world. There are still some minor details regarding taxes that need to be ironed out, which could change the expected outcome of the legislative overhaul. The outside chance that the bill fails to pass a final vote has mostly been ignored by investors and corporate executives.
Stocks in the U.S. opened mixed on Friday morning. The Dow Industrials were poised to rise about 0.5% yet the S&P 500 was moving 0.4% in the opposite direction. Shares were largely unchanged across Europe while Asian markets fell sharply overnight. The Japanese yen surged near its strongest so far in December at ¥112.3 per dollar. The euro was also slightly up to nearly $1.18 yet the pound sterling continued its slide to $1.33.
Treasurys fell slightly, sending the 10-year yield to 2.36%. Comparable 10-year bonds across the eurozone rose. In commodities, both WTI crude and Brent crude advanced about 0.5% to $57.40/bbl and $63.60/bbl, respectively.
Bitcoin prices traded north of $17,000 on Friday as the cryptocurrency continues to fluctuate more than $1,000 per BTC each trading day. Even as bitcoin keeps evangelizing new investors (or speculators), the exchanges and digital wallets that manage the industry are still searching for greater trust from other financial firms.
Looking ahead toward the last two weeks of the calendar year, contrarian investors appear to be waiting for fresh lows to jump back into gold. Considering that the precious metals have seen a seasonal downturn during the December-January period each of the last three years, we may see a wave of demand for gold near the end of the first quarter in 2018. Moreover, the approaching Chinese Lunar New Year (which falls on February 16th) typically provides a lift to demand for physical gold. Until then, this traditional safe haven will likely remain at bargain prices.
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.