Gold Unchanged as Bonds Finally Gain

February 23rd, 2018 by

Volatility continued to calm down across the financial markets on Friday.

The gold price was steady at $1,330/oz after rising in after-hours trading.

Silver prices were off 9¢ (-0.5%) to $16.50/oz.

Palladium was above unchanged at $1,032/oz but platinum slipped 0.5% back to $990/oz.

Bond Yields Retreat, Stocks Search for Direction

Stocks in the U.S. were mixed on Thursday. Movement has been less dramatic since the tantrum of the previous two weeks.

The VIX volatility index fell by 3% yesterday, down considerably from its recent highs.

Shares in Europe saw a similarly muted performance. London’s FTSE 100 headed for a weekly loss, down slightly again on Friday.

Markets in Asia rose sharply overnight. Hong Kong added almost 1% and both of Japan’s main indices ended the overnight session up better than 0.7%. The Shanghai Composite closed 0.6% higher.

Bonds also rose on Friday, but Treasurys have had a brutal start to the year.

The 10-year yield was down three basis points to just below 2.89%. However, the yield is still up about 50 basis points year-to-date.

European bonds followed their U.S. counterparts higher.

Treasury bills and longer-dated notes sold by government this week paid their highest interest rate in nine years.

The dollar was a bit firmer in response. The greenback traded just shy of 89.9 on the DXY index.

Futures on Wall St also pointed higher.

Short-covering and bargain-hunting by investors helped gold futures avoid a loss during yesterday’s session.

Markets Remain Focused on New Leadership at the Fed

Some are attributing the calmer demeanor of U.S. markets to the recent rash of inflation fears being overblown.

Various Fed presidents at regional branches have called into question the logic of raising interest rates too aggressively.

There’s also speculation about which Federal Reserve Board members will have the most influence in the post-Yellen era.

One of new Fed Chair Jerome Powell’s first tasks as head of the central bank is to give congressional testimony next week at a biannual appearance before l committees in the Senate and House.

Despite all the focus on the Fed and rising rates, markets are still expecting less than three rate hikes (of 25 basis points each) this year, according to Bloomberg News.

Treasury Secretary Mnuchin has also been wading into policy debates, somewhat confusing analyst’s forecasts about what to expect from U.S. institutions.

Across the Atlantic, the European Central Bank (ECB) is reiterating its support for more quantitative easing if necessary.

The euro was down 0.2%, threatening to fall below $1.23.

Elsewhere in the forex market, the Japanese was flat at ¥106.75. The British pound was up 0.2% on news that Prime Minister Theresa May had a constructive dialogue with her top ministers regarding Brexit. Sterling traded a hairy shy of $1.40.

Crude oil was basically unchanged after posting big gains on Thursday. WTI crude traded at $62.80/bbl and Brent crude was above $66.40/bbl.


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