Precious metals are under pressure this morning, as first-time jobless claims and personal consumption expenditures point toward an accelerating economy. Gold was down more than $12 an ounce Thursday morning, while silver and platinum group metals were hit especially hard.
Palladium, which was yesterday’s only bright spot in the precious metals sector, is being hammered. Spot palladium is down by $45 an ounce this morning. Platinum continues to see damage from yesterday’s news that major German cities plan to ban older diesel cars from their city centers in a bid to reduce excessive air pollution. Platinum is used for catalytic converters in diesel-fueled vehicles.
Precious metals futures ended February with a loss, buffeted by rising inflation fears. Gold finished the month 1.8% lower, silver was down 5%, platinum shed 1.8%, and palladium lost 1.7%.
First-time unemployment claims last week fell by 10,000 applications, surprising analysts. The 210,000 new claims is the lowest since 1969, when the population of the US was nearly 39% smaller.
Consumer inflation as measured by the Personal Consumption Expenditures Index (PCE) rose in January at the highest rate since last September. PCE rose 0.4% versus expectations of no rise at all. Year-over-year, the PCE rose 1.7%.
Core PCE rose 0.3% month-over-month and met expectations of a 1.5% rise year-over-year.
Combined, this news lent more fuel to speculation that new Fed Chairman Jerome Powell will reiterate yesterday’s hawkish testimony before the House Financial Services Committee when he speaks to the Senate Banking Committee this morning.
These rising expectations of faster interest rate increases by the Fed jerked stocks lower shortly after the market’s open on Wall St today. At 10am, the Dow Jones Industrial Average was down by 134 points, pushing it below the 25,000 mark. The S&P 500 was down 9 points, and the NASDAQ was 37 points lower.
Yesterday, stocks ended February on a down note, with the Dow losing 380 points (-1.5%), the S&P shedding 30 points (-1.1%), and the Nasdaq dropping nearly 38 points (-0.78%). The S&P Volatility Index (VIX) marched back above a reading of 20 yesterday, gaining 11.4%. After years of abnormally low volatility in the stock market, some of the younger traders have never had to deal with “normal” conditions.
Threats of higher inflation are rolling off the back of the 10-year Treasury note, with the yield actually down marginally at 2.852%.
The dollar is stronger again today after finishing February with the first monthly gain since last October. Weakness in the British pound, and also in the euro, over logjams in the UK’s Brexit negotiations with the EU are assisting the greenback in recent gains.
Oil prices are are still being pushed downward by rising US oil production, even as OPEC beats its production cut goals. The price for West Texas Intermediate, the US crude oil benchmark, was stomped 2.2% lower on Wednesday, crushing prices to a 4.8% loss for February. The bloodletting continued unabated this morning, with WTI down another 2% in early trading. Brent crude, the international oil benchmark, was down nearly 1% after finishing the month 4.7% lower.
Falling energy prices will eliminate one pillar supporting higher inflation, so the petroleum sector’s pain is the larger economy’s gain.
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