Gold and Silver Trade Higher As Stocks Slump

February 5th, 2018 by

The precious metals were up slightly Monday amid the biggest downturn for stocks since the Great Recession.

Spot gold added 0.15% to $1,334/oz this morning while spot silver jumped 1.45% to $16.82/oz.

Platinum traded just above unchanged at $992/oz. Palladium continued to buck the trend of the other metals, losing 0.85% to fall back to $1,030/oz.

Major Selloff on Wall St Rattles Markets

Friday was an absolute bloodbath for the stock market. The Dow Jones had its worst day in terms of percentage loss in two years, shaving 2.5% in value from the blue-chip index.

Nominally, it was the biggest single day (and week) of losses for U.S. markets in nearly a decade.

The trend carried over into Monday. Rising bond yields continue to drag shares lower. The 10-year Treasury yield is still near 2.84%.

As yields rise, fixed income becomes more attractive than equities.

Signs of accelerating inflation are also causing concern for investors. It suggests that interest rates may be heading higher at a faster clip than anticipated.

Higher interest rates mean debt is more expensive to service, eating into corporate profits.

Such a situation is precisely why the Federal Reserve has been careful to raise rates only gradually.

Central banks may have no choice but to tighten monetary policy more aggressively in order to head off inflation.

Several central banks hold policy meetings this week, including the Bank of England.

Tightening credit conditions could even trigger a wave of corporate defaults. Standards & Poor’s estimates that more companies around the world are highly leveraged than in 2007, right before the last market crash.

global crash

Global equities followed Wall St lower on Monday. Shares in Europe and Asia were down about 1%. Japanese indices fell more than 2% overnight.

This likely marked the sixth straight losing session for European stocks, the longest slump since November.

Bitcoin joined in the downturn, losing about 10% to trade below $7,500 for the first time in nearly three months.

Several credit card issuers have indicated they won’t approve cryptocurrency purchases, dealing the nascent market another blow.

Foreign currencies traded lower almost across the board. The euro and pound each lost ground against the U.S. dollar. The Japanese yen was flat.

Accordingly, the DXY dollar index was up 0.4% to about 89.6 in early trading.

Oil prices also sank. WTI crude was down 0.85% (-55ยข) to $64.90/bbl.

However, the spread between WTI and Brent crude tightened. The latter sank farther, tumbling 1.2% to $67.75/bbl.

 

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.

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  1. Pingback: Are Trump’s tax cuts backfiring on Wall Street? | Perry Chavers

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