Gold Looks to Consolidate Gains After Stock Selloff

April 3rd, 2018 by

The gold price ticked slightly lower on Tuesday after a swift decline for the stock market to start the second quarter.

Gold traded $6 lower (-0.5%) to about $1.334/oz when markets opened this morning.

Spot silver gave back 14¢ (-0.9%) to fall to $16.45/oz.

Platinum followed the other two metals lower, losing 1.3% (-$12) to $920/oz, its lowest since the new year started. Palladium actually added 0.2% (+$2) to $935/oz.

Futures for the precious metals saw a record-high volume of trades during the first quarter, according to CME Group.

Broad Losses for U.S. Stocks to Kick Off Q2

Monday was the first trading session of the second quarter. It wasn’t pretty for equities.

Stocks in the U.S. fell by as much as 3% on Monday. Even a late rally couldn’t save indices from closing more than 2% in the red.

Every listing on the Nasdaq 100 closed down. Overall, the 3,000-share Nasdaq Composite slumped 2.75%. The index is now negative year-to-date and is considered to be in “correction” territory, dropping 10% from its previous highs.

Similarly, all 11 sectors of the S&P 500 posted losses on Monday.

From a technical perspective, the Dow Jones and S&P are each trading below their 200-day moving averages (200-DMA) for the first time in more than 20 months.

Market breadth was rather top-heavy, however. Only about 20% of stocks on the entire New York Stock Exchange (NYSE) declined while the other 80% actually advanced.

This means the biggest losers were the biggest companies, weighing down on stocks in general. Shares of tech firms like Amazon and Tesla, for various reasons, got hammered.

The technology sector as a whole (especially FAANG stocks) wiped out nearly $80 billion in market capitalization yesterday alone.

Trump Tweets, Trade, and Tech

Politics had something to do with the losses for stocks, as well. In a highly publicized dispute, President Trump publicly chided Amazon for bilking taxpayers and the U.S. Postal Service.

Perhaps the defining characteristic for markets the past two months has been a revival of volatility. The VIX volatility index has more than doubled thus far in 2018, rising an astonishing 130% year-to-date.

Bonds eased after about two weeks of gains. The 10-year Treasury yield added about four basis points to 2.77% on Tuesday, up from its lowest in roughly two months.

Trade fears and the resulting stock selloff have driven more interest in precious metals and safe havens. Unlike the previous slump for Wall St in February, gold has been absorbing much of that risk-off demand.

The yellow metal ended Monday’s session slightly off of its highs, trading right around $1,340 per ounce (+1.2%). Silver advanced 25¢ (+1.5%) on the day.

Silver prices were actually down 5% during the first quarter before jumping yesterday.

Although platinum ended flat, palladium slumped 2%, bringing the sister metals into parity momentarily at $930/oz.

It remains to be seen whether this will be an isolated selloff for equities or if it signals a durable shift in investor psychology, potentially ushering in a bear market.

Shares trended slightly lower in Asia and Europe again on Tuesday.

The dollar has tumbled more than 2% so far in 2018, but the greenback has been relatively sanguine this week. It held steady at 90.0 on the DXY index again on Tuesday.

Notably, the euro slipped 0.3% against the USD to $1.225. The pound was unchanged at $1.405 while the yen slumped 0.6% to ¥106.5 per dollar.

Crude oil, meanwhile, mirrored the losses in stocks. WTI crude lost almost 3% for its biggest single-day decline in seven weeks.

In other news, home prices in the U.S. have been on the rise for seven straight months, increasing 6.7% year-on-year during February.

 

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.

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