Gold Price Rises, Dollar Down | July 9, 2018
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Gold Price Rises, Dollar Down

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Gold Price Rises, Dollar Down

A pullback for the U.S. dollar gave a lift to the precious metals as well as stocks Monday.

The gold price was up almost $8 (+0.6%) to $1,262/oz in early trading.

Spot silver advanced 0.8% (+13ยข) to $16.14/oz.

The Platinum Group Metals also jumped. Platinum rose 0.8% (+$7) to $850/oz and palladium rallied nearly 1.2% (+$11) to $960/oz.

Dollar Cools Off

The primary driver for the metals was the dollar. The DXY index was off 0.2% this morning to 93.8, its lowest in about three weeks.

In addition to providing support for the precious metals, the softer currency also seemed to benefit the global stock markets. Shares in the U.S. jumped about 0.7% at the opening bell Monday.

Asian stocks also closed higher overnight. Most indices gained 1.2% yet the Shanghai Composite surged 2.8%. However, the main Chinese index is still down more than 5% over the past 12 months.

European equities were marginally in the green, on pace for a fifth straight winning session.

Bond demand eased as the prospects of an escalating trade war took a back seat. The 10-year Treasury yield was up four basis points to 2.86%.

Overall, the Treasury market has been in a downtrend for the past two years. This could finally signal that bonds are on the verge of shifting into a bear market.

Aside from a slump in demand for bonds, the imminence of a yield curve inversion remains a major concern for markets.

Short-term Treasurys have seen their yields rise about twice as fast as longer-dated notes. The spread between the 2-year and 10-year T-note is now just 29 basis points, and the difference between 5-year and 30-year Treasurys is only 22 basis points.

Brexit and Buybacks

One of the leading developments in Europe has been the struggle to clarify the U.K.'s position in Brexit negotiations.

The Brexit secretary for Theresa May's government resigned, raising fears of an unruly political battle within Britain. Another of May's ministers, the well-known former London mayor Boris Johnson, also resigned.

The news didn't have much of an impact on prices. The pound sterling gained 0.45% to $1.334 while the euro was up 0.25% to $1.178. London's FTSE 100 was up 0.25%.

Commodity prices benefited from the weaker dollar. Crude oil was higher, especially overseas.

Brent crude rose 0.8% to $77.75/bbl. Meanwhile, WTI crude was up slightly to $73.90/bbl.

Many analysts believe that the negative effects of tariffs around the world is already factored into stock valuations. Trade tensions will continue to be a closely monitored story nonetheless.

At the same time, stock buybacks are projected to top $800 billion by the end of the year, which would shatter the annual record set in 2007. Given that Wall St has been fairly quiet of late, one assumes that prices would be falling in the absence of such share repurchases.

Although trade concerns appear to have been placed on the back burner by investors, markets have been sensitive to developments in Washington. The latest political battle revolves around who will be President Trump's next nominee to the Supreme Court.

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.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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