Gold Tests $1,320 Support Amid Wild Ride For Stock Market

February 7th, 2018 by

A late-afternoon rebound for U.S. stocks on Tuesday gripped everyone’s attention while the precious metal prices continued to lose momentum.

Gold lost 1.2% by yesterday’s close but gold prices held just 0.15% below unchanged at $1,321/oz on Wednesday.

The rest of the metals saw much steeper losses.

Spot silver plunged 20¢ (-1.2%) to fall to approximately $16.40/oz. The argent metal approached its lowest in almost 10 weeks.

Palladium shed 2.8% (-$28) to $975/oz, essentially coming into parity with platinum, which was off $8 (-0.8%) to $980/oz.

After a spectacular performance in 2017 and a strong start to the new year, palladium prices are now down 12% from an all-time high set in mid-January.

It’s also the first time that platinum has traded higher than palladium since September.

Wall St Rebounds as Volatile Action Finally Returns

On Tuesday, the Dow Jones fluctuated in a huge 1,000-point range during a roller-coaster ride of trading.

The direction of market movement shifted from positive to negative (and vice-versa) dozens of times throughout the day.

At one point during the session, the 30-share index fell almost 3% in the red. However, a late rally lifted the index 2.3% by the time markets closed, the best daily gain in 15 months.

Markets are experiencing their greatest bout of volatility since China caused a flash crash by suddenly devaluing its currency, the yuan, back in 2015.

This is pretty strong evidence that the bears and bulls are aggressively fighting it out.

If nothing else, it’s safe to say that a degree of drama has returned to markets after a prolonged period of calm.

Yesterday’s recovery for stocks helped ease some of the demand for bonds. The 10-year Treasury yield moved back up to 2.79%.

Following its bounce-back performance, Wall St opened mixed on Wednesday.

Japanese markets saw modest gains overnight although shares sank on most of mainland Asia’s exchanges. The yen advanced 0.25% to ¥109.3 per dollar.

Meantime, European markets are being driven by fresh progress in forming a cohesive governing coalition in Germany.

Germany’s benchmark 10-year Bund yield rose three basis points to 0.72%. Equities around the continent were about 0.8% higher.

Elsewhere in the eurozone, Greece is cautious yet optimistic about taking steps to access foreign capital through traditional bond sales.

The Greek government is hoping its financial situation will soon normalize after a constant state of anxiety and a succession of three different bailout deals over the past decade.

Across the English Channel, the as-yet-unknown impact of Brexit still looms large.

Even 20 months after the Brexit referendum, a cloud of uncertainty hangs over what kind of deal the U.K. will strike with the European Union.

Both sides are unwilling to disclose greater detail of what the divorce could end up looking like because of the sensitive nature of ongoing negotiations.

That uncertainty is frustrating businesses across the country due to the lack of a clear path forward.

Britain’s 10-year Gilt saw its yield rise two basis points to 1.54%. The FTSE 100 index in London traded about 1% higher.

U.S. Markets Turn Their Attention Back to Politics

tax-extenders

Congress managed to pass another temporary spending bill this week to stave off a second government shutdown in the span of a month.

President Trump openly commented on his willingness to allow another shutdown to occur in order to force concessions from Democrats on immigration.

Nonetheless, legislators may be close to a two-year deal on the budget. Such a maneuver would likely seek a hefty increase in funding to the Pentagon.

The U.S. dollar traded 0.33% in the green this morning, returning to the previous trading session’s level of about 89.9 on the DXY index.

As a result, the British pound (-0.2%) and euro (-0.4%) each posted losses against the USD.

For commodities, oil prices pared some of their recent losses. WTI crude rose modestly to $63.50 per barrel while Brent crude was up almost 60¢ (+0.9%) to $67.45/bbl.

Bitcoin recovered by more than 6% Wednesday and is back above $8,000.

Even so, the deluge of bad publicity for cryptos continued: Goldman Sachs boldly predicts that many cryptocurrency values will fall to zero.

It’s well worth noting that the intrinsic value of gold makes that kind of situation impossible.

 

The opinions and forecasts presented 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.