As the economic situation in the U.S. continues to improve, the murmurs grow about an impending interest rate hike from the Federal Reserve. Many analysts now expect the first rate increase to take place sometime in June, moving up previous expectations of September. Wall Street opened sharply lower while the dollar continued its climb, rising near 98.4 on the DXY index. This was largely due to the weakening of the greenback's peer currencies around the world. Meantime, gold and silver opened slightly higher, with the former at $1,166/oz and the latter at $15.85/oz; yet, the Platinum Group Metals traded about 1% in the red early this morning.
Yesterday in the Markets
Stocks fell hard on Monday as the dollar rose again. The Dow Jones Industrials and the S&P 500 are now in the red on the year. The precious metals didn't make up much ground, either. Treasuries slid back even further to 2.14%.
Factors Affecting Gold Today
Some short covering is helping gold inch higher today, even as it remains held down by the strength of the dollar. The USD is mostly benefiting from weaker currencies around the world: the euro has fallen to a 12-year low around $1.075 with the continued implementation of ECB QE; the Canadian dollar fell along with the Aussie dollar, the latter near a 6-year low owing to disappointing Chinese economic data.
China's consumer inflation picked up in February, but the broader picture remains unconvincing. Even as CPI grew by 1.4% in 2014, the country's PPI (Producer Price Index) tumbled some 4.8%, marking the third consecutive year of declines in producer prices. This shows that even when consumer prices rebound, China is still mired in deflationary trends. This is raising expectations that the People's Bank will engage in more monetary easing in order to combat falling prices.
It's not only the dollar's major peer currencies that are experiencing difficulties, either. The Turkish lira and the Danish krone have also been under significant pressure from the general uncertainty of the forex market. The lira has lost 10% of its value against the dollar already in 2015, and the krone is a candidate to be unpegged from the euro (which hasn't happened yet). This theme will likely repeat itself throughout the year as the greenback receives more upward support from the tightening of U.S. monetary policy. Such a development would continue to suppress precious metal prices, which have not performed particularly well so far this year.
EIA Petroleum status report and the Treasury budget come out in the U.S.; in China, both retail sales and industrial production numbers will be released; the U.K. will also release industrial production data, while Australia's labor force survey comes out.