Precious Metals Pull Back as Market Anxiety Stays Muted

April 5th, 2018 by

The gold price slid overnight amid a strong recovery for stocks on Wednesday.

Gold traded around $1,325 per ounce this morning after futures closed at $1,340/oz yesterday.

Spot silver reversed direction to $16.37/oz, a gain of 0.25% (+4¢).

Platinum and palladium continued their slump, as each metal dropped below $915/oz.

Markets Show Renewed Risk Appetite

Wall St closed significantly higher on Wednesday during a volatile day.

After rebounding from steep losses early in the session, the Nasdaq added 1.45%; the S&P 500 closed up 1.15%; and the Dow Jones advanced about 1%.

The precious metals erased early-morning gains in response. Gold futures ultimately added 0.2% but silver and the Platinum Group Metals tumbled.

Bond traders showed less panic (followed by less exuberance) than their counterparts in equities. The 10-year Treasury yield actually rose to around 2.79%.

Thursday morning brought the weekly jobless claims report from the Department of Labor. New claims rose by 24,000 to 242,000 during the last week of March.

Continuing claims were actually at their lowest in close to 45 years.

Meanwhile, an unexpected drop in U.S. crude inventories caused oil prices to slip. WTI crude traded just above $63/bbl while Brent crude fell to $68/bbl.

The U.S. dollar moved 0.2% higher on the DXY index, up to 90.3. Its major peer currencies fell by about the same margin. The yen traded at ¥107 per USD for the first time since late February.

Investors Receive Reassurance About Trade

Stocks opened sharply higher in the U.S. as concerns over trade and tariffs receded.

Shares in Europe surged better than 2% despite disappointing purchasing managers’ index (PMI) data. PMI in the U.K. hit its lowest in 20 months.

Asian markets were mixed again overnight. Japanese indices closed up 1.5% but shares were off in China and Hong Kong.

Traders and investors seem to have suspended their fears over a global trade war for the time being. Threats of aggressive import duties by the U.S. and China are being interpreted as merely opening the door to negotiations.

U.S. Commerce Secretary Wilbur Ross told the media, “Even shooting wars end in negotiated settlements.”

New White House economic adviser Larry Kudlow made similar assurances that the back-and-forth over tariffs is the normal business of international trade.

With all the fretting about trade, it’s worth pointing out that the U.S. trade deficit is at its highest in over nine years (and still rising).

Treasurys fell modestly on Thursday, pushing the 10-year yield up to 2.81%.

 

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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