After snapping a 7-day skid on Monday, gold finished up slight to $1,095/oz when markets closed in Hong Kong overnight. Spot prices fell by about $4 per ounce when markets opened in New York on Tuesday before finding support at the familiar $1,087/oz level—the 50% Fibonacci retracement level halfway between gold's 1999 low and 2011 high.
Though the precious metals largely retreated this morning on a firmer dollar, we can expect a bit of short covering and bargain hunting going on in the precious metals markets today with prices remaining low. In the coming weeks, gold should also be helped by the continued uncertainty regarding the global economic outlook.
Yesterday, gold gained about $2 per ounce to break a 7-day losing streak. It followed that up by adding $3 during trading in Hong Kong, so this morning's drop actually hasn't had much of a net effect. As is often the case, volatility has subsided a bit since the metals made big moves lower based on expectations of an imminent Fed rate hike.
Meantime, silver was sharply lower (~1.5%) to $14.45/oz, a 9-week low. Platinum was also more than 1% lower to just above $900/oz, while palladium was flat.
Markets Still Jittery
Between the Fed trying not to look shaky in its resolve to raise interest rates and sluggish growth around the rest of the world, there are still reasons for investors to be worried and cautious.
Boston Fed President (and noted policy dove) Eric Rosengren joined the "December Club" by expressing his support for a rate hike at the FOMC's meeting next month. Even if the Fed balks on December, there are at least 4 non-voting alternate FOMC members with hawkish views on interest rates who will move into voting positions on the committee in 2016. This could make it hard for Janet Yellen et al to continue to keep rates low when a majority of the committee is advocating for them to go higher.
Stocks were down for the 4th straight day on Monday, as U.S. indices each lost about 1% for the worst single-day losses in 6 weeks. The Dow Jones sank into the red on the calendar year on what may be a mix on pricing in the rate hike and a correction or moderation of the perceived stock bubble. The gradual slowdown of China's economy is also weighing on equities.
The dollar was just slightly weaker yesterday but held above 99 on the DXY. It opened about 0.4% higher this morning as the euro neared a 7-month low below $1.07 on more talk of monetary easing from the European Central Bank. Bond yields were lower across Europe.
As for the U.S. bond market, Treasurys fell for the 6th day in a row on Monday, pushing yields close to a 4-month high—2.35% for the 10-year note. This is the longest losing streak for Treasurys in 6 months. A lot of the movement is people getting out of maturing bonds in favor of those with better yields due to the likely December rate hike being priced in.
Things were generally rougher for commodities. Crude oil prices were down for the 4th consecutive trading day on Monday, but there are signs that surpluses are shrinking as everyone pumps as much of the stuff as possible.
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.