Spot gold opened about $10 lower just above $1,170 this morning as the dollar continues to firm up. The greenback approached 91.0 on the DXY index, pulling U.S. stocks higher with it. European stocks were also markedly higher on expectations that the European Central Bank will be acting very soon to deal with deflationary risks in the Eurozone. Meanwhile, commodities were mostly in the red, with Brent crude 93 cents lower (-1.62%) and gold down about 1%.
Yesterday in the Markets
Markets in the U.S. were closed for the New Year's Day holiday. Both the precious metals and stocks went into the holiday break on a sour note Wednesday, sliding into the red as investors reposition themselves for the new calendar year.
Factors Affecting Gold Today
ECB President Mario Draghi gave a speech in Frankfurt, Germany this morning that indicated the central bank will move swiftly to defend the Eurozone against deflation, which probably means expanding its asset purchases to include the sovereign debt of member nations. The ECB's impending stimulus measures are having the predictable effect of making Eurostocks happy. Germany's DAX, France's CAC 40, and the composite Euro Stoxx 50 index were all higher this morning. The euro fell to its lowest level since the middle of 2010; this year was the worst performance for the European currency since 2005. The dollar continued to surge, pushing toward a 5-and-1/2-year high against a basket of its 16 major competitors. All of this has been bearish for gold and precious metals, especially as crude oil prices continue to trickle ever-lower.
Chinese stocks were also higher on similar expectations that the People's Republic is planning to expand its monetary stimulus in order to combat the seemingly inevitable slowdown of the Chinese economy. The Hang Send index notched its highest close since August 2011 despite continually falling manufacturing numbers from the mainland. While equities ride high in both Europe and China due to their planned stimulus boosts, the strength of the dollar continues to drag down gold prices. The approaching Lunar New Year, however, should spell a seasonal bump for the yellow metal in February, when China (and a significant portion of the world) celebrates the transition from the Year of the Horse to the Year of the Goat.
Motor vehicle sales numbers will be released on Monday, an important industry for gauging the pace of the economy. Tuesday, January 6 is the big data day: factory orders for November, the PMI Services index, and the ISM non-manufacturing index will all be announced.