Even as stocks looked to climb higher, the precious metals were modestly in the green during early trading Thursday. Spot gold trended slightly into positive territory, gaining $2 per ounce to just above $1,277/oz. Platinum was virtually flat at $912/oz but palladium added $5 (+0.55%) to $921/oz. Meanwhile, the silver price added roughly 1% to trade at $16.73/oz.
After falling from its September highs near $1,350/oz, gold is now trading right at its 100-day moving average (100-DMA). This potentially represents a key turning point for the yellow metal from a technical perspective. The question now is: Will gold break below or above this $1,273/oz level? The answer over the last two trading sessions this week may set the tone and provide some clarity about how gold will perform over the course of the fourth quarter.
The leading economic data dominating the news cycle for the financial sector was the Labor Department's release of weekly jobless claims. First-time jobless filings actually fell by 12,000 last week to 260,000 claims for the final week of September. The data signals a return to normalcy after a spate of hurricanes battered the country earlier in the month. The conclusions that are being drawn from the upbeat report is that the labor market remains fairly tight and layoffs have been limited given this scenario.
It's encouraging that the precious metals rose in spite of the favorable unemployment data. It's still more surprising given that the dollar added 0.35% on the DXY index this morning to nearly 93.8.
The stock market, in the meantime, appears to already be pricing in the slew of tax cuts that have been put on the table by the Trump administration. Some investors (albeit a minority) are understandably skeptical that the task will get done in Congress in light of previous—unsuccessful—efforts at healthcare reform and immigration reform. These were also priorities that the public was led to believe the White House and Congress were "on the same page" about.
Alas, such consensus proved to be a mirage. Hastily and optimistically pricing in the benefits of tax cuts before hardly any details have even been made public is of a piece with how Wall St operates, of course. This exuberance could lead to a sharp pullback in the event that efforts at tax reform stall or face obstacles—which, if one is familiar with how things work in Washington, is all but inevitable.
Stock futures in the U.S. were inching higher again on Thursday morning. Equities remain at all-time highs, but much of these gains could simply be a reflection of the dollar losing more than 8% year-to-date. Nonetheless, the weaker dollar has boosted American exports, which is helping put a dent in the so-called "trade gap," or trade deficit. The U.S. trade deficit shrank to an 11-month low during the month of August, according to the Department of Commerce.
Amid geopolitical tensions in Europe, the euro fell to a six-week low. In addition to British Prime Minister Theresa May employing tough rhetoric about how the U.K. is willing to walk away from Brexit negotiations with no deal, another potential divorce between Spain and the influential Catalonia region is also weighing on investor confidence in the eurozone. The Catalans overwhelmingly voted for independence from Spain in a referendum this past Sunday, but the country's constitution doesn't allow for such a vote to occur in the first place, rendering the results void in the eyes of the Spanish government. The ensuing struggle has undoubtedly injected some volatility and uncertainty into the European markets.
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