Gold prices are up slightly this morning, as markets wind down ahead of the Christmas weekend. Many traders are taking today off, stretching the three-day holiday to four days. Aside from some window dressing by fund managers, activity should remain quiet through New Years.
Profit-taking in stocks is mostly been put off to after New Years, as the Trump Rally seems to lose steam. Investors are expecting the new Congress to quickly reduce capital gains taxes, which makes the risk of betting that they rally will continue into the new year more palatable.
Spot gold has erased Thursday's loss of $3 an ounce this morning. December gold futures are basically unchanged from yesterday's settlement. Spot silver is flat this morning, after shedding 14 cents yesterday. Silver futures are trading flat this morning, after losing 11 cents at Thursday's settlement.
The US dollar was trending just below unchanged in European trading overnight, but has managed to barely peek into positive territory in New York. The British pound remains under 1.23 against the dollar, as an upward revision to third quarter GDP in the UK failed to give support to the cable. The euro is holding steady versus the dollar, but is still trading under $1.05. The Japanese yen has recovered slightly against the dollar. Currency markets in general are quiet, as traders prepare for the long weekend.
In US markets, the final estimate of third quarter GDP rose from 3.2% to 3.5%, pushing bond yields higher as prices sank. Yields on the 10-year Treasury note are near unchanged this morning. The government will be auctioning $88 billion in bonds in holiday-shortened markets next week. Bond traders are waiting to see what level of demand these new bonds will see, as a sign of what the large players are expecting.
That boost in third quarter GDP sent visions of higher oil demand dancing in traders' heads yesterday. West Texas Intermediate futures gained almost 1% to settle at $52.95 a barrel. Brent crude futures gained just over 1% to break back above the $55 resistance level, settling at $55.05 a barrel. Action this morning has Brent back below $55, as WTI eases further away from the stubborn $53 a barrel mark. Prices for WTI have had trouble breaching that $53 mark on several occasions this month.
The Trump Rally on Wall St is starting to show its age, as stocks have put in a short-term top. Expectations that the Dow would break the magical 20,000 mark before Christmas have been put to rest. The index has been trapped in a range between 19,800 and 20,000 for several days. Stocks are bouncing along just above unchanged this morning, as many trading desks have already been closed for Christmas.
Banking stocks in Europe gained Friday, on what would seem terrible news at first blush. Deutsche Bank has agreed on a $7.2 billion dollar settlement with the US Justice Department over fraudulently selling "toxic" mortgages bundled into mortgage-backed securities (MBS) that were then marked investment grade. Credit Suisse also settled similar charges yesterday, agreeing to pay a $5.28 billion fine.
While these penalties were harsh, they could have been much worse. Initial penalties against Deutsche Bank were set at $14 billion, which would have wrecked the bank. Deutsche Bank's and Credit Suisse's plea agreements for lower payments than originally sought improved the prospects of the banks, and reduced uncertainties regarding their future.
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