Precious metals are down across the board this morning, as the US dollar is riding upbeat consumer inflation news to make another attempt at the 92.0 mark on the DXY index of major currencies. At 9:30 am EDT, spot gold was trading at $1,311.80, down $10.80. Spot silver was down 25 cents to $16.21. In the platinum group metals, spot platinum was down $10 to $903, and palladium was $4 lower at $960. The stronger dollar is also weighing on crude oil prices.
Stocks started the week higher on Wall St, as McDonald's earnings came in far better than expectations. Perhaps the largest influence this morning is the news of two mega-mergers. Mobile phone carriers Sprint and T-Mobile have announced a merger, which will have to be approved by anti-trust regulators. The merger would leave American consumers with just three choices for nationwide cell phone plans.
The other big merger announce today was between Marathon Petroleum and refiner Andeavor in a $35.6 billion deal.
Consumer prices for March came in as expected this morning, showing a gain year over year as unusually soft readings from early lat year roll off the books. Personal Consumption Expenditures (PCE) recorded a 2% rise year over year, hitting the magic number that the Fed wants to see before embarking on a more hawkish monetary policy. This follows and 1.7% rise in February. PCE month-over-month remained at +0.2%.
Core PCE, which is what the Fed used to measure inflation under former Fed chair Janet Yellen, rose 1.9%, the largest gain in 13 months. This information, added to a better than expected first quarter GDP reading, will likely reaffirm the Fed's rate hike plans. The Federal Reserve Open Market Committee meeting begins tomorrow and lasts until Wednesday afternoon. Since there is no press conference after the meeting this month, chances of a rate hike this week are nil.
Geopolitical risks are easing after the first meeting between the leaders of North and South Korea on Friday signaled a willingness to de-escalate tensions, and perhaps, bring the Korean War to a formal close. North Korean leader Kim Jung-Un has put forward a proposal to de-nuclearfy his nation if the US pulls its troops out of South Korea.
The yield on the 10-year Treasury note is marginally lower this morning at 2.957% after ending the week at 2.959%. This morning's gains on Wall St will likely mute any demand for bonds today, and traders take a risk-on attitude. One thing that bond traders are keeping a close eye on is the yield curve on Treasuries, which has flattened again. If short term yields exceed long term yields, if forms an inverted yield curve, which is a strong sign of an impending recession.
Gold snapped a two-day losing streak to head into the weekend on Friday, with June gold futures settling at $1,323.40 for a 0.4% gain on the day, but a 1.1% loss for the week
Silver futures for July are now the most-active contract. It fell 7 cents on the day to end the week at $16.497. July silver ended the week with a 4.2% loss.
Platinum futures were the only other of the top four precious metals to notch a gain Friday, $6.30 higher to settle at $916.40 an ounce. It ended the week with a 2.6% drop. Action in the palladium market continued to the downside. The “other PGM” saw more big losses Friday, with the July contract falling another $16.05 to $963.00. That marked a 1.6% loss for the day, and a huge 6.5% loss for the week.
Palladium recently saw a big spike in prices over fears that US economic sanctions on Russia would cut off the world’s leading supply of the metal. However, a softening of rhetoric from the Trump administration has dampened those fears, leading palladium to give back all those gains.
The dollar index made a run at 92.0 (a fresh 3-month high) Friday morning after the first quarter GDP report beat expectations, but was unable to hold on. The DXY ended marginally higher for the day. Support came from negative economic news in the UK sending the British pound lower. Perceived profit-taking in the greenback later in the session gave the euro some breathing room. This wasn’t enough to truly affect the drubbing the common currency took earlier in the week.
Crude futures were nearly flat to end the week Friday, with both West Texas Intermediate and Brent contracts losing 9 cents. Brent had broken the $75 per barrel mark for the first time earlier in the week. Trump's eventual action against Iran is still up in the air, resulting in oil traders unwilling to overexpose themselves one way or the other.
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