With a weaker dollar, gold was helped overnight as short covering took the yellow metal to a 4-week high early in trading this morning before easing slightly. The dollar is down as the Fed has warned of an impending global economic slowdown that will likely delay any rate hikes in the U.S.
Fears over a pullback in economic growth around the world have coincided with a bear market in crude oil resulting from a massive supply glut and lower consumption expectations. In the meantime, equities are falling almost across the board.
Yesterday in the Markets
At Monday's open, stocks began trading significantly down from last week, while precious metals made a most recovery. As of 10:00 am EST:
Dow Jones: 16,524.54 (-0.12%) S&P 500: 1,911.49 (+0.28) Nasdaq: 4,291.27 (+0.35%)
Gold: $1,229.00 (+0.60%) Silver: $17.38 (+0.45%) Platinum: $1,257.75 (-0.37%) Palladium: $782.75 (-0.29%)
Economic News Affecting Gold
Gold saw robust physical demand overnight as a series of holidays are being observed simultaneously around the globe. Japan celebrates its National Sports Day today, while Canada observes its Thanksgiving. Bond sales in the U.S. are closed today in observance of Columbus Day, so when trading resumes tomorrow the yield on the 10-year Treasury note will remain at an 11-month low of 2.28% as investors pour into treasuries. The yuan was up against the dollar.
The Chinese economy saw a boost on positive data, as import prices rose 7% last month while export volume jumped 15%. This helped base metals--one of China's most important natural resources--which in turn lifted the precious metals, as well. Commodities remain down as WTI Crude slipped below $85 and Brent Crude traded below $89, both representing four-year lows for oil. With the drop in oil prices, rumors are emerging that some of the OPEC member countries are discounting their oil prices in order to keep a steady flow of revenue coming in.
Global growth concerns are broadly affecting stocks, as Japan's Nikkei 225 sank to a two-month low. EU stocks recovered from an early dip this morning. Elsewhere in Europe, Finland saw its AAA credit rating downgraded to AA+ by Standard & Poor's largely on the failure of Nokia, whose downturn has had a seismic affect on the national economy. Finnish Prime Minister Alexander Stubb said that it may take up to four years to restore Finland's economy to healthy activity levels, as the Scandinavian democracy now lags behind even Portugal and Spain in productivity.
Geopolitical News Affecting Gold
ISIS continues to carry its fight to the Syrian border town of Kobani amid ongoing airstrikes from the U.S.-led coalition. Experts have noted that if these airstrikes are unsuccessful in breaking up the ISIS offensive on Kobani, the city will fall to the insurgency within days. The town, located near the Turkish border and controlled by a Kurdish community, has been under siege for about three weeks, driving some 170,000 residents from their homes.
In Hong Kong, tensions are rising between pro-democracy demonstrators and pro-government groups. As police forces are moving to re-open the city's business districts to commerce, the student-led protesters have vowed to redouble their efforts unless their demands for elections free from Beijing's influence are met. The government has reiterated that there is "zero chance" of a compromise on the horizon. The situation may grow ugly as the reputation (and flow of business) in Hong Kong continue to take a hit. Both sides continue to dig their feet in, as the demonstrations are estimated to have cut commercial activity by as much as 40%.
U.S. retail sales are set to be released on Wednesday this week, while the Producer Price Index (PPI) for Final Demand will also be announced Wednesday morning. This data should provide a clearer picture of how American industries are faring as we enter the final quarter of the year.