Dollar Weighs On Commodities | August 8, 2018
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Dollar Weighs On Commodities

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Dollar Weighs On Commodities

Stock markets and commodities both ceded ground Wednesday morning as the dollar renewed its rally.

The gold price opened down $2 at $1,209/oz, holding above key support at the $1,200 level.

Spot silver dipped 0.2% to $15.30/oz.

Meanwhile, palladium tumbled 1.2% (-$11) to $890/oz while platinum lost 0.5% to trade near $825/oz.

Stocks Pull Back

The S&P 500, considered the broadest measure of the U.S. stock market, is on its longest winning streak in six months. The index hit an all-time high yesterday but experienced selling pressure in early trading.

The Nasdaq got a boost when shares of Tesla jumped more than 10% yesterday. This followed a tweet from CEO Elon Musk claiming that he had secured funding to take the company private at $420 per share.

However, some observers have suggested that the statement from Musk could run afoul of securities law. Shares of Tesla currently trade around $380.

U.S. indices opened modestly in negative territory.

Elsewhere on Wall St, quarterly earnings were strong for the pharmacy chain CVS but disappointed for the media giant Disney.

Crude oil prices edged higher yesterday before giving up ground in early trading Wednesday.

Brent crude was off almost 1.0% to fall below $74/bbl while WTI crude slumped 1.5%.

Basel III May Impact Gold

Most commodities traded lower, as well. The U.S. dollar was up 0.15% to move above 95.3 on the DXY index.

With Prime Minister Theresa May's government in turmoil, the pound sterling dropped to its lowest in a year. The GBP traded below $1.29 while the euro was flat at $1.159.


EU lawmakers may have provided some support for the gold market. They have decided to ease stringent liquidity requirements for the region's bullion banks. The burdensome requirement was part of the Basel III financial regulations adopted by the eurozone and may have driven many banks out of the gold trade.

The London Bullion Market Association (LBMA) successfully lobbied the EU Parliament by arguing that gold is itself a liquid asset and doesn't need to be backstopped by extra capital. The regulations would mainly impact the world-renown London Bullion Market, but it's still unclear how Basel III will apply in the U.K. after Brexit.

Several banks and major industries have already relocated from London to mainland Europe in anticipation of a messy Brexit aftermath.

Shares were off about 0.25% in Europe but rose 0.75% in London.

Asian markets were mixed overnight. Equities slipped less than 0.1% in Japan but plunged 1.6% lower in China. Since its last high in late January, the Shanghai Composite has shed more than 24% of its value.

Back in the U.S., the Federal Reserve remains squarely on the minds of investors. The central bank is expected to raise interest rates at its September meeting after characterizing the American economy as "strong" in its August statement.

Richmond Fed President Tom Barkin recently told an audience in Virginia that rates will need to rise higher if the Fed follows through on normalizing monetary policy.

Nonetheless, the 10-year Treasury yield held unchanged at 2.97%.

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.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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