Gold Surges Overnight as Global Equities Stumble

March 22nd, 2018 by

Gold prices rallied overnight, hitting as high as $1,334/oz before easing back to $1,330 per ounce by Thursday morning.

A weaker dollar helped the precious metals jump after the conclusion of yesterday’s FOMC gathering.

However, gold outpaced its counterparts in early trading. Spot silver gave back 12¢ (-0.7%) but still traded close to $16.45/oz.

The Platinum Group Metals saw less demand than gold, each slipping by about 0.8%. Platinum hovered above $950/oz and palladium steadied at $980/oz.

Central Banks, Monetary Policy In Focus for Investors

As expected, the FOMC raised its target federal funds rate by 25 basis points to 1.75% on Wednesday afternoon.

Chair Powell was at least as circumspect in the post-meeting presser as his predecessor Janet Yellen often was. Powell drove home his “middle of the road” approach to policy in the characteristically ambiguous, noncommittal manner that the Fed is known for.

On the whole, members of the Federal Reserve also raised their forecasts for interest rates over the next two years, citing a strengthening economic outlook.

This hawkish adjustment was tempered when the Bank of England stood pat on Thursday, leaving its key rate unchanged at just 0.5%.

Russia, which has been accumulating gold reserves at a rapid pace, holds its central bank meeting tomorrow.

Jobless claims for the past week nudged higher, rising by 3,000 to 229,000 new claims. The report from the Department of Labor suggests the labor market has remained hot in March after a strong February.

Another detail from the Fed meeting was a projected unemployment rate of 3.8% by the end of 2018.

U.S. housing prices also continued to rise last month on a thin supply of homes for sale.

Meanwhile, Congress hopes to pass an omnibus spending bill by Friday to stave off another government shutdown. Few representatives and senators will even have a chance to read the actual text of the bill before voting.

Risk-Off Dominates as Gold and Bonds Beat Stocks

Traditional safe havens outperformed risk assets during Thursday’s session. Gold has now erased all of its losses from the past month.

Wall St was set to open sharply lower, with all three U.S. indices down more than 1%.

Shares were down 1.5% in Europe and the U.K. while the pound sterling hit a seven-week high above $1.41. The euro was just above $1.23 after shedding earlier gains.

Thursday saw the dollar pare its recent losses. The greenback traded nearly flat at 89.7 on the DXY index.

Safe-haven demand helped the Japanese yen pop 0.6% to ¥105.4 per dollar, its highest in roughly 16 months (since November 2016).

The Nikkei 225 closed up by 1% last night. Tokyo’s Topix index advanced 0.65%.

Trade war fears sent the Shanghai Composite index 1% in the red while the Hang Seng lost 1.1% in Hong Kong overnight.

The global bond market similarly saw safe-haven buying. Swift demand for government debt across the board pushed the 10-year Treasury yield down six basis points to 2.82%.

Crude oil prices fell back from their six-week highs in spite of the dollar’s weakness. WTI crude backpedaled to $64.70 per barrel and Brent crude dipped to $68.90/bbl.

Bitcoin slumped back below $9,000 per BTC as potential regulatory pressure continues to weigh on cryptocurrencies.

 

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