Spot gold surged higher right around the time markets opened on Friday morning thanks to awful durable goods data released by the Department of Commerce.
The yellow metal traded about 0.5% higher at $1,292/oz yet still faces hard resistance near the key $1,300/oz level. Meanwhile, spot silver gained almost 1% on Friday, adding 16¢ to $17.11/oz. Platinum prices were up slightly but palladium remained flat at about $925/oz.
The big news driving markets on Friday was a dismal showing for durable goods orders during July. This generally includes large equipment and heavy machinery, giving a sense of how factories, airlines, and other firms are expecting the economy to perform in the medium-term. New orders for durable goods plunged 6.8% last month, nearly a full percentage point more than the expected drop of 6.0%. The reading was especially dragged down by a lack of new investment by businesses in transportation equipment.
This decline may have some connection to the ongoing trade dispute between the White House and China. Approximately one-third of the world's commerce passes through the South China Sea, which has been a hotbed of disputed territorial rights and near-confrontations between China, its neighbors, and the United States. If firms are expecting any disruption of trade passing through this region, then it would make sense not to make any new large investments in transport equipment.
Aside from potential trade wars, Washington has its own mounting problems domestically as Congress may run into (yet another) debt-ceiling standoff with the White House. President Trump has said he is willing to allow a government shutdown if the legislature doesn't provide funding for one of his primary campaign promises, a wall along the Mexican border.
This possible fiasco over the debt ceiling, which has essentially become an annual ritual for lawmakers, is disrupting the bond market. This is especially true of short-term Treasury bills that mature in October, right when the debt-ceiling issue could be unfolding if no solution is reached before then.
In the meantime, Treasury Secretary Mnuchin will be looking for a solution that not only keeps the lights on in D.C. but also preserves the country's current credit rating by not flirting with a default on our debt obligations. Even big banks like HSBC, Citi, and Morgan Stanley are warning about the debt ceiling, among other factors that could cause a sharp market downturn.
Stocks were higher across the board on Friday morning, with Japan's Nikkei 225 leading the way (+1.8%). However, the dollar fell below 93.0 on the DXY index, plunging right around the time that gold prices surged. Investors will certainly be listening to comments from Janet Yellen and Mario Draghi as the gathering at Jackson Hole concludes today, looking for any clues about the future direction of global monetary policy.
Crude oil prices were higher on Friday along with gasoline prices. This is due in no small part to the arrival of Hurricane Harvey, which is expected the batter the gulf coast of Texas with a downpour of rain and possible storm surge. This has caused many offshore oil rigs to shut down during the storm, driving energy prices higher in the short term.
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.