Gold Flat Amid Turkish Crisis | August 10, 2018
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Gold Flat Amid Turkish Crisis

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Gold Flat Amid Turkish Crisis

Despite widespread concerns about the Turkish economy across markets, the precious metals showed only modest movement Friday morning.

The gold pirce opened unchanged at $1,212/oz after charting a V-shaped pattern in after-hours trading.

However, spot silver was down 8¢ (-0.55%) to $15.35/oz.

Platinum fell slightly to $828/oz while palladium nudged higher to about $905/oz.

Turkey Under Pressure

Turkey's economy has been shaky for much of 2018, but the situation is now threatening to develop into a crisis.

The country's central bank has been forced to aggressively raise interest rates in order to support the national currency, the lira. Unfortunately, it hasn't worked.

In addition to the futility of intervention through monetary policy, the Trump administration has announced it will double its tariffs on aluminum (20%) and steel (50%) exported from Turkey.

The lira lost 12% in overnight trading and has fallen 20% this week alone. This brought the currency to a new all-time low against the USD.

There is a distinct fear that other banks and governments, especially in Europe, could be overexposed to assets in Turkey. This could lead to a contagion crisis. At this point, it likely won't take much to trigger an even more massive selloff.

Turkish President Erdoğan has implored citizens to exchange any gold or dollars they have for liras.

Consumer Prices Rise

The Treasury market saw strong demand amid the crisis in Turkey. The 10-year yield dipped to 2.90%.

Inflation expectations for the U.S. economy grew after the consumer price index (CPI) for July was released. Core CPI beat expectations, advancing 2.4%. This is the highest in a decade.

Seemingly on cue, oil prices trended higher Friday. Brent crude traded near $72.30/bbl while WTI crude advanced 0.75% (+50¢) to $67.30/bbl.

The dollar jumped to a one-year high, and the British pound sank to a 13-month low below $1.28. The euro also fell sharply, trading at just $1.145.

Stocks on Wall St opened lower after a mixed performance Thursday. European indices slumped as much as 2.0%.

The Shanghai Composite inched higher overnight, but stocks in Japan closed down more than 1.0%.

Aside from the concerns about Turkey, the Russian economy and its currency, the ruble, have been hit by sanctions from the U.S.

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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