Another rally for the U.S. dollar sent gold prices falling again on Wednesday, building momentum for a trend that traces back to last week. Spot gold was down sharply this morning, losing $10 per ounce to $1,284/oz. Spot silver was about 0.4% lower to $16.72/oz. Both precious metals were trading at four-week lows.
Platinum lost 0.5% in early trading while palladium actually advanced 0.2%, bringing the gap between the two metals to a mere $5—which is often less than the spread between a bullion dealer's bid and ask prices for either metal!
Here are Tuesday's closing numbers for reference:
Gold: $1,293.60/oz (-$16.70, -1.27%) Silver: $16.78/oz (-38¢, -2.19%) Platinum: $922/oz (-$17, -1.81%) Palladium: $910/oz (+$4, +0.44%)
WTI crude: $52.15/bbl (-7¢, -0.13%) Dow Jones: 22,284.32 (-11.77, -0.05%) Nasdaq: 6,380.16 (+9.57, +0.15%) S&P 500: 2,496.84 (+0.18, +0.01%) DXY: 93.00 (+0.39, +0.43%)
The dollar has been inching higher since last week's meeting of the Federal Reserve. The USD was up another 0.6% on Wednesday to 93.55 on the DXY index. This was aided in part by the pound sterling and the euro losing 0.3% and 0.5%, respectively. Investors saw their confidence take a hit after confusion characterized the preliminary Brexit negotiations. At least during the upheaval period where the terms of the exit are formally negotiated, the U.K. could face sky-high import duties (i.e. tariffs) around the world as a result of leaving the EU. This also comes as France and Germany are planning an unprecedented degree of integration and cooperation that is supposed to create one giant market among Europe's two largest economies within the next decade.
Another political debate was at the center of market activity in the U.S., as well. President Trump is slowly rolling out details of the proposed tax reform legislation that Wall St has eagerly awaited since Trump took office. The bill is reportedly a coordinated effort by congressional Republicans and the Treasury Department, along with some guidelines from the White House. The headline to come out of the work on Capitol Hill thus far has been an effort to cut the top corporate tax rate from 35% to 20%. There are indications that the tax code will be simplified by reducing the number of tax brackets, as well.
One does wonder what impact a major tax cut, absent other reforms, could have on blowing out the trade deficit. Right now, Washington is relying on the assumption that the lost revenue from lowering taxes will be paid for by future economic growth. A similar gambit was memorably attempted by past administrations.
In other economic news, durable goods orders in the U.S. rose by 1.7% in August, coming in well above expectations. Stocks opened in the green, with the Nasdaq leading the way 0.75% higher. Demand for bonds has eased, pushing the 10-year T-note yield back up to 2.30%. Investors have had ambiguous reactions to Chair Janet Yellen openly second-guessing that the Fed hasn't raised rates quickly enough under her watch. Yellen's term as Fed Chair is up next year, while Vice Chair Stanley Fischer is leaving the central bank next month.
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