Gold and Silver Edge Higher, Stocks Rally on Strong Retail Sales

Posted On: Tuesday, November 15, 2011

Gold and silver maintained slight gains while stocks managed to reverse earlier losses to finish with solidly gains.  Sentiment was buoyed by news that Mario Monti will be able to form a government in Italy.  There had been fears that he would be unable to garner sufficient political support to do so.  A much better than expected October Retail Sales report and tame inflation news also helped markets.  

Today's gains came despite an ongoing rise in European sovereign debt yields.  Spain was unable to fully issue a debt issue, raising fears that it is set to join the other PIIGs in debt hell.  Spanish 10-year yields remain above 6%.  Italy saw its 10-year yield re-approach 7%, before the ECB reportedly stepped in to keeping yields from hitting the redline.  Just as disturbing, French bond yields are joining the sell-off in a big way. 

Data today showed that Eurozone economic growth was an anemic 0.2%, saved by growth in France and Germany.  However, recent data indicates that the area is set for a recession as austerity measures, and economic uncertainty take their toll.  The EUR-USD finished lower at 1.354, extending yesterday's decline.  Today's market action was a distinct anomally from recent days when EUR weakness generally correspond with stock market declines. 

U.S. October retail sales rose 0.5%, better than the 0.2% expected.  Ex-autos, retail sales rose 0.4%, better than the no change expected.  PPI for October was -0.3%, better than the -0.2% expected.  PPI ex-food and energy was unchanged, again better than the 0.1% increase that had been expected.  Finally, the Empire State Manufacturing Index for November was 0.61, better than the -2.6 that had been expected, and a sharp jump from the -8.48 in the prior month.  Collectively the data suggests the U.S. is off to a strong start in the final quarter.  Strong retail sales, a rebound in manufacturing in the tri-state area, and non-existent inflation are all positives.  However, with Europe clearly in a downtrend, the outlook is uncertain. 

Precious metals buyers again set a cautious tone.  Spot gold prices were positive, but just barely, up $3.29 to trade at $1,784.83 per troy ounce.  Silver outperformed, with spot silver up $0.37 at $34.69 per troy ounce.  The gold-silver ratio stands at 51.56.

Commodities outside precious metals are mostly higher.  WTI crude futures added $1.28 to trade at $99.42 per barrel.  Copper futures were essentially unchanged, up $0.0011 to trade at $3.518 per pound.

Treasuries moved off their best levels to trade flat.  The 10-year yield was unchanged at 2.05%.  The USD was mostly higher.

Bloomberg is reporting that the four Republican Candidates are in a dead heat with Herman Cain edging out Ron Paul 20% to 19% among Iowan caucaus attendees.  Romney comes in at 18%, while Gingrich is at 17%.  The nominating contest is due to start in several weeks.

New York last night removed all the Occupy Wall Street protestors from Zuccati Park in lower Manhatten.  The removal took place with hundreds of law enforcement personnel.  However, Bloomberg is reporting that a court order was just issued that allows the protesters back. 

Zerohedge is reporting that investor John Paulson sold $1.3 billion of his gold ETF holding in the third quarter.  Surprisingly, he added to his position in BAC and COF.  BAC has been notable in its continued descent in October and early November, with shares of BAC now trading with a 5 handle. 

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