Public pronouncements by Federal Reserve officials have markets readjusting their guesses as to when the first increase of interest rates from near-zero will occur. This is putting wind beneath the wings of the U.S. dollar, which reached as high as 99.99 on the DXY index before the opening bell in New York.
This put pressure on gold, which is denominated in dollars, as well as pushing the euro under $1.06.
Yesterday in the Markets
Gold and oil both rose Friday against a slightly stronger dollar. Gold closed comfortably above $1200, up 1%, while silver gained 2%, platinum gained 1.5%, and palladium closed up over 1.8%. Brent crude finished the week up 5.3%, while West Texas Intermediate notched a 5% gain. A continued rally in crude would be supportive of gold.
The euro dropped for the 5th day to a 3-1/2 year low against the dollar, putting gold prices in euros near a two-year high. As the dollar continues to gain on expectations of an interest rate hike by the Fed, gold has declined in dollar terms, but it has risen in price this year in most other currencies.
Euro stocks were up Friday to the highest level since 2000, fueled by mergers and "money printing" by the European Central Bank. After a shaky start, Wall St gained around 0.5%, and held it into the close.
Factors Affecting Gold Today
Netflix and Qualcomm are boosting the Nasdaq in early morning trading, while the Dow and S&P 500 are only slightly positive. Yields on Treasuries are higher, as investors wait to see if there will be a June interest rate hike in the U.S.
San Francisco Federal Reserve President John Williams, who is a voting member of the FOMC this year, sharpened expectations of a summer rate hike with his comments this morning. Espousing an earlier start and more gradual increases for the Fed's rate hike program, he said that the dangers of needing to reverse a hike have lessened. The risk has grown that waiting longer will require a more aggressive schedule of interest rate hikes than the gentle increases he would prefer. Williams says the Fed needs maneuvering room in case the aging bull market dies - something it does not have with interest rates near zero.
These remarks would seem to indicate that June is not off the table for the first hike in benchmark rates, with the increase probably being a tiny .125%.
The Nasdaq is getting a big boost from Netflix and Qualcomm this morning, while the Dow and S&P 500 are up only slightly. The big drop in Chinese exports hasn't seemed to hurt the stock markets in Shanghai or Hong Kong, both up over 2%. Yields continue to rise in Treasuries, as investors decide to see if a June rate increase is really on the table.
Earnings reports will be big movers on Wall St this week, including those from "too big to fail" banks JP Morgan and Wells Fargo tomorrow.
Lots of economic reports are out tomorrow, including retail sales and producer prices in the U.S., industrial output in the EU, and both consumer and producer prices in the UK