Dollar Rallies, Bonds Ease, Precious Metals Pare Losses

February 20th, 2018 by

The selloff of bonds cooled off on Tuesday as U.S. markets reopened after the President’s Day holiday.

Gold trading closed early yesterday at 1 pm EST.

Precious metal prices tumbled at the open but quickly recovered by about 10 am in New York.

Spot gold was still down more than $6 (-0.5%) to $1,340/oz.

The silver price cut almost all of its losses. Silver traded at $16.62/oz, down just 3¢ (-0.15%).

Platinum reversed direction, steadying at 1,005/oz. Palladium rose 1.0% to about $1,030/oz.

Rising Rates, Bond Yields Causing Concern for Investors

The U.S. 10-year yield had been as high as 2.93% this morning before easing back to 2.895%.

Higher Treasury yields have been the all-consuming story in the financial markets. It’s appeared to weigh on stocks to begin the week.

Equities in the U.S. are coming off their best weekly performance in years, erasing a chunk of their steep losses to start February.

Some have dismissed the recent correction in stocks as purely the result of trading algorithms.

Although this certainly played a role, it obscures the possibility that there is any underlying reason for markets to fall.

Investors are still watching the steady flow of corporate earnings on Wall St.

Indices were mixed at the opening bell.

Tomorrow sees the release of the Federal Reserve Open Market Committee (FOMC) meeting minutes in January.

Markets are pricing in better than an 80% chance of a rate hike by the Fed in March.

Most action around the global markets was spurred by a rally for the U.S. dollar, however.

A firmer dollar usually means lower precious metal prices.

Gold would certainly see fresh safe-haven demand if the correlation between stocks and bonds falling in unison remains so high.

Typically, the two asset classes tend to move in slightly opposite directions.

The USD was up 0.6% to 89.6 on DXY index, its highest in more than a week.

Forex markets responded accordingly. The euro ($1.23) and yen (¥107.7) each were off 0.5% against the dollar. The pound sterling trickled just below $1.40.

The softer euro helped indices in Europe gain about 0.5%. London’s FTSE 100 fell slightly by 0.1%.

Japan’s Nikkei 225 slumped 1% in the red by last night’s close. The Topix index in Tokyo lost about 0.7%.

Most commodities shrugged off the stronger dollar. WTI crude traded modestly higher at $62/bbl.

Yet the March contract for Brent crude was off by almost 0.9%, dropping to $65/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.