Gold touched an important resistance level at $1,278 on the COMEX open this morning, as Asian demand returns after the Chinese New Year. After an initial round of short selling at the Asian open, gold gained modestly overnight, hitting a two-week high at the New York open. Gold finished Friday up 1.9% for the week, while silver posted a 4.3% weekly gain. Traders will be watching to see of gold makes another serious run at the important $1,279 resistance today or tomorrow.
Speaking of silver, it too is up modestly in early Monday trading, after getting a nice little vertical boost in Asia. The platinum group metals are also slightly higher today.
Precious metals are being helped by market nervousness, and a weaker dollar. The DXY dollar index dropped in Euro trading, and is bouncing just under Friday's close. Emerging market currencies are tanking once again, as well, particularly in Turkey, Hungary, and Ukraine.
Wall St. opened lower, but is trending upwards. Disappointment over Friday's non-farm payroll report has the market uncertain whether new Fed chairman Janet Yellen will take it as a sign to keep bond-buying at present levels, or even roll back some of the recent reductions in its quantitative easing program which is widely credited for the bull market in stocks, both in the US and in emerging markets.
Fridays downgrade of sovereign debt of both Turkey and Ukraine, though hardly unexpected, is making markets jittery as well. Riots in the streets and the seizing of government buildings by protesters in Ukraine, and a widespread corruption scandal reaching the highest levels of government in Turkey are events that hardly inspire confidence in European and American investors.
Euro stocks were a mixed bag, as good performances in the core EU nations were drug down by weak markets in the peripheral nations. Not helping matters was the ruling by the German Supreme Court that the European Central Bank's "outright monetary tranactions" (OMT) quantitative easing policy violated the German constitution. The high court bumped the case up to the EU Court of Justice for a final verdict. This takes Fed-style QE off the table for the ECB, and puts the responsibility back on national governments to craft a viable fiscal policy (which is as it should be, right?)
Asian stocks were happy to see the Chinese back to work. The Nikkei was up 1.77%, and the Shanghai exchange posted a healthy 2% gain. The Hang Seng closed slightly down, due to the weight Chinese banking stocks have in the index. There's still lingering unease that China barely missed having its own "Lehman moment," and the underlying factors have not changed.
Gold is continuing to build an upward channel in the short-term charts, as money flees equities. $24 billion was pulled out of the U.S. stock markets just last week, and $6.4 billion fled emerging markets in the same time period.
$13 billion of that went into bonds, and it seems a good portion of the remainder is heading to gold for safety and diversification. We'll be watching to see if gold makes a run at resistance, or waits to hear Yellen talk tomorrow.