Sharp slowdowns in Asia's two largest economies had investors rushing into safe haven assets overnight, pushing gold prices higher. Chinese exports fell by the largest amount in five years, while the Japanese economy was confirmed to be contracting. The US dollar is once again being shunned as a safe haven asset, with buyers flocking to government securities and gold.
Gold prices spiked in late European trading, sparking a little bit of profit taking. Gold is trading just above unchanged in New York, after closing up $7.90 at $1,267.00. April gold futures settled Monday at $12.64 an ounce, down $6.70.
Gold is probing support at the $1,265 level early in New York. If that falls, the overnight low at $1.259 comes into play. Resistance is being seen at $1,276. Getting through that opens $1,279 as the next hurdle.
Meanwhile, silver was slightly lower around $15.50 per ounce. The precious metal cousin of gold has been a bit more volatile than its cousin gold as is usually the case. Spot silver touched as high as $15.73/oz in early trading, but remains up off of its session lows at $15.27/oz. Platinum continued to trade right at the $1,000 per ounce range. Palladium, on the other hand, sank 2.6% lower to fall below $570/oz.
Safe haven demand in Asia has pushed the 10-year Japanese bond to a record -0.12%. This is causing some investors to shift to European sovereign debt and US Treasuries. Speaking of Europe, German industrial production for January came in far above the most optimistic forecasts, up 3.3%. This is the largest one-month jump since 2009. Unfortunately, Germany and the EU as a whole are still in the grip of deflation. Inflation was recorded at -0.2%, ratcheting up pressure on the European Central Bank's policy meeting this Thursday.
The question over this week's meeting isn't "if" the ECB will implement more easing, but "how much." Watch for the euro to fall if traders get what they want, helping gold in euro terms. Investors fully expect ECB President Mario Draghi to hold true to his word about stimulus and quantitative easing. At the beginning of last year, Draghi said he would "do whatever it takes" to support the eurozone economy, theoretically by devaluing the euro through money-printing manipulation.
Crude oil continues its tear. fueled by rig counts and rumors. Brent crude settled at $40.84 a barrel, while WTI closed at $37.90, both up by 5.5%. Ecuador's announcement that it was arranging a meeting of Latin American oil producers was the catalyst for Monday's gains.
Economic conditions in the US have traders raising the likelihood of another interest rate hike by the Fed, but not next week. An analysis of Fed fund futures give a zero percent chance for March, and an 18% chance for April. Any rate hike will put US exporters at an even greater disadvantage, as negative interest rates and stimulus weakens the currencies of our trading partners.
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