Thursday morning saw gold prices slip modestly lower to $1,264/oz, still near a two-week high. Spot silver lost 6¢ (-0.4%) to $16.10/oz, platinum was steady around $920/oz, and palladium advanced another 0.6% to $1,025/oz. This is close to the highest palladium has traded all year. The metal is up better than 49% this year, making it the best-performing futures contract in the entire commodities sector by a wide margin in 2017.
A number of key economic data points were driving markets on Thursday. The Philadelphia Fed’s manufacturing index showed a healthy surge through the first three weeks of December. The improved business conditions are partly attributable to the weaker U.S. dollar and the impending changes to the country’s tax code. Both of these developments make American exports more attractive overseas.
The victory on Capitol Hill in getting the aforementioned tax cuts passed is being touted as the first major reform to the system in over 30 years, though its impact on jobs and growth will have to play out before middle-income Americans begin to see the positive effect that is anticipated by policymakers.
In addition, the Department of Commerce revised its reading of third-quarter GDP to 3.2%, which fell slightly short of expectations. The expansion of the economy during Q3 is still the best in nearly three years. In the meantime, the Department of Labor reported weekly jobless claims on Thursday, showing that new filings for unemployment benefits jumped by 20,000 to the highest in five weeks.
Stocks were mixed in Asia overnight and began to steady in Europe after sinking in early trading. Bonds in the eurozone mostly saw selling pressure for the fourth straight day while U.S. Treasurys finally halted a five-session slide. Crude oil pared its recent gains, losing 0.5% to $57.80/bbl. Bitcoin prices continued their wild volatility, slumping 2.3% this morning to about $16,000 per BTC.
The USD was up about 0.1% to 93.4 on the DXY index, as its main rivals (the euro, pound, and yen) all fell by about the same margin. The Bank of Japan stood pat on interest rates and its “current policy framework,” meaning that the country’s central bank will not be eliminating any of its quantitative easing (QE) purchases in the near-term.
In Great Britain, consumer confidence in the U.K. fell to a four-year low as a number of issues surrounding Brexit have thrown Prime Minister May’s hold on leadership into question. Still, the FTSE 100 in London rose sharply this morning, advancing 0.7%. Wall Street opened slightly higher as the success of tax reform is fueling more investment in equities.
Traders on the other side of the Atlantic will also be closely watching the vote being held today in Catalonia, the semi-autonomous region of Spain (and home to Barcelona) that tried to hold an independence referendum earlier this year. Today’s local elections has the imprimatur of legitimacy from Madrid and could go a long way toward determining if the Catalan assembly is in control of independence hardliners or pro-unity representatives.
Looking forward, analysts are drawing a variety of conclusions about how gold prices will respond to the forthcoming tax cuts. For the time being, the yellow metal is showing no clear direction: During the fourth quarter, gold has traded in the tightest range of any quarterly period in the past 10 years. The precious metal has shown a seasonal tendency to perform well after the New Year, so some believe the market is poised to break out after the holidays pass.
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.