The markets will turn their attention to Janet Yellen's speech this afternoon around 3:45 pm ET at the San Francisco Fed. She is expected to offer her personal outlook on the FOMC's next move and broadly discuss the direction of monetary policy. Gold was falling this morning just below $1,200/oz ahead of Chair Yellen's speech as some profit-taking on the yellow metal's rally this week sets in. After trickling lower for most of the week, the dollar has also moved back toward 97.5 on the DXY spot index this morning.
Yesterday in the Markets
Each of the precious metals moved slightly higher yesterday while U.S. stocks dipped marginally in the red. After bonds slumped, sending benchmark yields back over 2.00%, the 10-year T-note saw a bit of demand, parking yields at 1.98%.
Factors Affecting Gold Today
Crude oil prices were falling this morning after they spiked in response to the potential civil war (and international proxy war) brewing in Yemen. The concern is not Yemen's actual output of oil--they account for a miniscule 0.2% of global production--but its strategic geographic location. The country shares a border with Saudi Arabia and is an important hub for oil distribution around the region. With war and turmoil disrupting normal operations, a distribution choke-point in Yemen could develop, stopping up the flow of crude that has piled up in record-high inventories.
Meantime, on the home front, fourth-quarter GDP in the U.S. showed a 2.2% expansion of the economy. This growth was fueled by consumer spending, while at the same time corporate profits dropped during the 4Q, marking the weakest performance for U.S. corporations since before the financial crisis. Some analysts had expected the GDP numbers to be revised upward to 2.4%, but were ultimately disappointed.
European shares are mixed this morning as the tragic story of the Germanwings Airbus that crashed into a mountainside continues to unfold. There is now a belief that the co-pilot of the flight purposely downed the plane, killing all 150 people on board. Aside from this horrific incident, real estate sales have been booming in Europe due to the relative strength of the dollar. With a rapidly rising currency, American investors have been gobbling up European real estate at a relative bargain. The euro weakened this morning to just above $1.08.
In Asia, Japan's core CPI was flat in February, year-over-year. This shows a clear damper on inflation, and even the ominous presence of deflation in the world's third-largest economy. While the drop in oil prices and soft consumer demand in the country are being credited for the lack of price growth, it should be noted that this stagnation is taking place in spite of the Bank of Japan's enormous ¥80 trillion quantitative easing package.
A mix of economic data comes out abroad on Monday, including the Swiss leading indicator; the European Commission (EC) Economic Sentiment; and German CPI. In the U.S., Personal Income and Outlays, the Pending Home Sales index, and the Dallas Fed Manufacturing Survey will all be announced.