The precious metals appear to have carried over their positive momentum from last week, opening solidly higher in early trading on Monday. Spot gold was up about $7.50 to trade at $1,298 per ounce. The $1,300/oz milestone has been a key stumbling block for the yellow metal, so if gold prices can break above this level and hold, it would be a very strong indicator for the fourth quarter.
Meanwhile, spot silver advanced better than 1% to trade above $17.20/oz. Platinum and palladium each moved about 0.8% higher.
Blame the Weather
It's a common practice of the Labor and Commerce Departments to routinely explain away poor economic reports as being affected by inclement weather. (This naturally cuts both ways: Either it was too hot during the summer or too cold during the winter for people to patronize local businesses, the thinking often goes.)
However, in the case of Hurricane Harvey battering the state of Texas, the weather really is having a negative impact on the broader economy. A staggering amount of rain and flooding is imperiling thousands of homes and families, requiring a great deal emergency services. Not only is this forcing consumers to stay home, but the Gulf Coast of Texas has one of the highest concentrations of oil rigs and refineries found anywhere in the Western Hemisphere. Approximately 50% of all U.S. oil refining capacity is offline due to the super storm. More damage could be on the way as the hurricane lurches back east toward Louisiana, gaining strength in the warm waters of the Gulf of Mexico. As expected, this has caused gasoline prices to surge (+5% on Monday), but WTI crude is actually down about 0.5% to $47.50 per barrel. This is because the freeze in activity actually lets the crude supply build.
Partly because of the growing emergency in Texas, the dollar slipped another 0.33%, falling to 92.4 on the DXY index. Stocks in the U.S. opened slightly higher on Monday morning while the benchmark 10-year Treasury yield was steady around 2.18%. Across the Atlantic, tensions are flaring in Europe over the Brexit negotiations. Germany is reportedly pulling investments out of Britain as the multilateral discussions regarding how to handle the country's exit from the European Union continue to stall. Markets in the U.K. are closed today due to scheduled a bank holiday.
Aside from the usual flow of international economic news, the major development with a potentially huge geopolitical impact is the U.S. debt ceiling squabble on Capitol Hill. Congress appears prepared for a battle with the White House over funding President Trump's proposed wall along the country's southern border. Neither side has backed down rhetorically, creating a troubling "powder keg" that could blow at any time. If the standoff goes too far, the rating agencies Moody's and Fitch could downgrade the U.S. credit rating—even if the debt ceiling issue is pushed back to December by a short-term Continuing Resolution that keeps the government funded for a few extra months.
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.