With many folks already focusing on their holiday vacation plans, the financial markets are seeing subdued trading action on Wednesday. As dollar speculators take profits following the USD's recently rally to its strongest levels in over a decade, the precious metals are receiving a modest lift.
Although there is relatively little safe-haven action due to the exuberance of the current rally in stocks, the gold price managed to add 0.2% in early trading Wednesday, moving into the $1,135/oz range. The yellow metal gave back some of these gains by 10:30 am EST. In the meantime, silver prices were 0.6% lower, sliding 10¢ per ounce to just above $16/oz.
With the vast majority of important economic data and market-moving events (like the FOMC meeting) now behind us, the rest of 2016 shapes up to be a rather dull ride for the markets. As the Christmastime celebrations approach, many traders have naturally gone home for the week already, leading to thin trading volumes and less action in general. The number of vacant trading desks will only accelerate as the week progresses. This applies to the broader markets as well as precious metals, and is likely to continue through the New Year.
Though this lack of activity means that individual participants can have a greater impact on price movement, the general trend to expect is sleepy markets. If anything, a sizable chunk of new positions being taken by traders are for year-end "window dressing" and tax-loss selling. In other words, these are simply mechanisms for making an investment fund's portfolio look better to shareholders—or, conversely, making it look worse to the IRS to mitigate one's tax burden. In the absence of new monetary policy decisions and economic reports, the next two weeks or so will tell us very little about the fundamentals of the financial markets.
Coal in the Stocking
However, all the news was not about bringing good tidings and ushering in a joyous holiday season.
In Europe, Italian and Spanish banks remain in serious trouble. It seems a foregone conclusion that Italy's largest lenders will require some kind of bailout; unfortunately, there's reason to believe that even this will not be enough to rescue these firms, let alone the country's banking system at large. Even as the eurozone economy has shown signs of picking up of late, the worsening political turmoil between populist and internationalist forces in Europe is exacerbating economic tensions.
There's also more news shedding light on the bad behavior of the world's biggest banks. JPMorgan and Barclays were reportedly fined $97 million by Swiss regulators in relation to rigging Libor, the key interbank interest rate.
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.