Airstrikes, Short-Covering Boost Gold: Morning Market Update Sept 23 - Gainesville Coins News
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Airstrikes, Short-Covering Boost Gold: Morning Market Update Sept 23

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Airstrikes, Short-Covering Boost Gold: Morning Market Update Sept 23

In addition to the United States' airstrikes against ISIS in Syria, the Arab monarchies (Saudi Arabia, United Arab Emirates, Qatar, Bahrain) assisted the cause by conducting airstrikes of their own. The terrorist group has previously pitted itself against the Arab establishment, claiming the destruction of the Saudi Kingdom as part of its platform.

Speaking at a global conference yesterday, King Abdullah II of Jordan pointed out that ISIS offers attractive salaries--$1,000 per month--to unemployed youth and foreign fighters. (This represents middle-class wages in Jordan, for reference.) So long as they can continue to fork over the cash, it seems ISIS will indefinitely draw recruits.

Partly on the details of the airstrikes against Syria, gold jumped over $15 up to $1,232 this morning before settling back down to $1,223.32 at the open of the New York Comex, up about $8.

Yesterday in the Markets

The precious metals continued to trend downward after last week's losses. Gold bounced up to $1,221 around noon but quickly slipped to $1,217, riding out rest of the afternoon trading in the $1,215 range. Silver remains near 4-year lows, and the Platinum Group Metals are still testing their lower resistance levels. At Monday's close, precious metals prices were down across the board:

Gold: $1,214.80 (-$1.40, -0.12%) Silver: $17.73 (-$0.06, -0.34%) Platinum: $1,321.00 (-$12.00, -0.9%) Palladium: $800.00 (-$9.00, -1.11%)

Stocks saw their biggest one-day loss in almost 7 weeks on Monday. The S&P 500 had its worst trading day since August 5th, dropping 0.8%. This was the third straight day of losses for the S&P, which closed at 1,994.29. The Nasdaq slipped 1.14%, the Dow Jones Industrial Index fell from Friday's all-time high after giving up 0.6%, and the Russell 2000 (made up of small cap stocks) posted its largest single-day loss since July 31. The announcement Monday evening that the Obama administration will close loopholes in the tax code that allow corporate inversions maintained the downward pressure on the equities markets.

The DXY dollar index ventured into positive territory late in the morning before falling back to about unchanged in the afternoon, sitting at 84.7 (-0.04%). The Japanese yen gained against the dollar, seeing its second straight day of safe haven demand. ECB President Mario Draghi gave a downbeat evaluation of of the Eurozone economy Monday, momentarily driving the euro lower before it ended flat against the dollar.

Economic News Affecting Gold

New York Fed president William Dudley made remarks about how a strengthening dollar could put a damper on U.S. growth, breaking the Fed decorum of not commenting on the dollar. A stronger dollar means less advantageous trade, and possibly lower inflation, which would confound the Fed's targets of raising inflation rates to about 2%.

rising dollar chart

Overall, worries over slowing economic growth around the world--from Europe to China to the Americas--has been stifling stocks. The EU Markit Composite PMI was at its lowest reading of the year, dropping from 52.5 to 52.3. This has placed a heavy downward pull on the world markets as the European economy continues to show signs of weakness. However, surprisingly strong numbers for HSBC China's flash manufacturing PMI (up from 50.2 to 50.5) may provide a respite for commodities, which have been battered lower on poor growth projections across the globe. Although this is a sign that Chinese factory activity increased in August, most commodities remained lower; WTI crude oil was down 89 cents, or about 1%, on Monday to $91.56/barrel, while Brent crude oil dropped $1.46 (-1.44%) to $96.97. Typically, gold will track with other commodities and move lower against a rising dollar.

Geopolitical News Affecting Gold

The conflict in Syria could spell some safe haven demand for gold as more and more countries become embroiled in the fight against ISIS. With its proximity to the Levant, Israel has also been drawn into the dispute, shooting down a Syrian warplane that was flying over the Golan Heights. This marks the first time in nearly 30 years that the Israelis have shot down a Syrian aircraft.

Russia condemned the Arab airstrikes in Syria, positioning itself against any and all Western "incursions" into war-torn regions where countries are ostensibly cannibalizing themselves. How Russia responds to what it characterizes as "threats to Syrian sovereignty" by the U.S. coalition will also be telling in the coming days and weeks.

Looking Ahead

Numbers for new homes sales will be announced tomorrow. Housing data in both the U.S. and China have been somewhat poor of late, so investors will at least be looking for signs of of a deepening slump. Thursday promises to be a big day on the economic news front, as durable goods orders, first-time jobless claims and services flash PMI are all set to be released.

 

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News

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