Precious Metals Plunge as Treasurys and Stocks Also Sell Off

May 15th, 2018 by

A strong rebound for the U.S. dollar sent gold, stocks, and bonds all much lower on Tuesday.

The gold price plunged to start Tuesday’s session, down more than 1.6% (-$21) to $1,292/oz, its lowest in roughly seven months.

Traders will be watching to see if gold closes below the important support level of $1,300.

Spot silver tumbled as well, losing nearly 2.0% (-32¢) to $16.17/oz.

Platinum also fell by 1.4% to trade below $900/oz. Palladium was the worst performer among the four metals, losing $25 (-2.5%) to $966/oz.

From a demand perspective, the use of palladium in automobiles is on track for a new record-high.

Markets Shrug Off Higher Retail Sales Data

Global markets fell despite an encouraging report on U.S. retail sales.

Retail sales for April were up 0.3% according to the Census Bureau, meeting expectations for a 4.7% year-on-year increase.

March’s figures were also revised upward to 0.8%. The stronger spending is likely to boost second-quarter GDP.

Although U.S. stocks and the dollar managed to eke out small gains yesterday, the two moved in opposite directions on Tuesday.

Wall St fell sharply in early trading after the dollar index surged 0.85% to 93.4.

The yen, euro, and pound all fell by about the same margin.

Meanwhile, the May reading of the Empire State manufacturing index from the New York Fed showed a solid rebound.

Even these signs of an improving economy are giving investors pause because it may trigger more interest-rate hikes from the Federal Reserve to keep markets from overheating.

Bond Market Sees Steep Losses, Commodities Mixed

10-year Treasurys slumped, pushing the yield back up to about 3.06% this morning.

Global bonds followed suit. The 10-year British Gilt and 10-year German Bund also posted losses as their yields rose three basis points each.

Wavering confidence in U.S.-China trade talks is partly to blame for the selloff in bonds.

Equities in Europe and Asia were mixed but mostly steady.

With growing turmoil between Israel and Palestine, as well as uncertainty over Iran’s economic future, oil prices continue to jump.

oil market

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WTI crude added 0.4% Monday, once again approaching $71/bbl. However, Brent crude rose 1.4% to cross above $78/bbl.

Both benchmarks were mostly unchanged Tuesday morning.

Oil prices keep rising despite increased U.S. shale production (according to the Energy Information Agency) and the highest active rig count in over three years (according to data from Baker Hughes).

Gold lagged behind while other commodities were mixed in spite of the robust dollar.

 

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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