Technical considerations drove the precious metals lower on Tuesday morning.
The gold price responded to some profit-taking after reaching a four-month high during yesterday’s session. Spot gold lost $5 (-0.4%) to $1,334 per ounce as the yellow metal is testing whether support at the $1,330/oz level will hold.
However, there are still a growing number of investors and speculators going long on gold according to the Commitment of Traders (COT) report.
Silver prices, which are typically the more volatile between the two metals, lost 1.25% (-20¢) early this morning to trade back at $17.12/oz.
Platinum was mostly unchanged at 997/oz but palladium plunged $30 (-2.67%) to $1,092/oz.
The precious metals showed little reaction to a disappointing Empire State manufacturing index released by the New York Fed. The gauge of manufacturing in the region remained in positive territory but fell short of expectations.
Meanwhile, New York Fed President Bill Dudley expressed concerns that markets will react too late to further tightening of monetary policy by the Federal Reserve. Any sudden adjustment could cause a huge market disruption. This is a potential consequence of years of the central bank catering to market whims.
To Dudley’s point, there is still overwhelmingly positive sentiment among stock investors. Margin debt has been at elevated levels for a prolonged period, suggesting widespread speculation and complacency due to strong economic growth around the world over the past year or so. This could be a sign that the markets are ripe for a correction.
Futures on Wall St were sharply higher as U.S. exchanges reopened on Tuesday. The dollar finally traded higher overnight for the first time in about a week, yet the DXY index was still down 0.2% to 90.78. Bonds gained as the 10-year T-note yield fell two basis points to 2.53%.
Equities rose in Europe and closed sharply higher in Asia. The euro, pound, and yen all lost some ground against the USD.
Many of the most prominent cryptocurrencies took a nosedive this morning as a variety of the digital tokens lost as much as 20% of their value. The volatile swing in prices followed reports that China will continue to stamp out trading in cryptos. The bitcoin price fell to a six-week low below $12,000.
At the same time, plans for state-run cryptocoins in Russia and Venezuela seem unlikely to gain much traction. Regulators in the West will undoubtedly be determined to undermine and impede their success.
In other commodities, copper lost 0.75%, falling by the most in six weeks. Nickel also lost ground. The reversal of fortunes for these industrial metals may be driven by the Chinese government’s efforts to curb continued debt accumulation in the country’s provinces.
WTI crude was down 0.3% to $64.10/bbl this morning. Brent crude tumbled about 1% to $69.50/bbl.
Markets may also be cautious this week as a political stalemate over immigration in Washington could potentially lead to a government shutdown.
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