The precious metals saw a surge on Wednesday morning, with the spot gold price jumping about 1% to $1,355/oz as markets opened in New York. Likewise, the silver price was sharply higher, adding 2.5% to trade above $20.30/oz again.
Platinum and palladium, which sometimes get left behind when their precious metal cousins post gains, also joined the party. The platinum price was also about 2.5% higher, approaching $1,185/oz, while spot palladium rallied a staggering 5.5% to $730/oz, its highest level in more than a year.
As is often the case, the main factor that caused the precious metal prices to rise was weakness in the U.S. dollar. The greenback slid more than 0.7% on the DXY index, falling to 95.5, a new six-week low. Part of the rationale behind this action is lower expectations about how soon the Federal Reserve will raise interest rates. The move also sparked some fresh demand for government bonds despite the meager yields on U.S. Treasurys.
Similarly, U.K. Gilts saw renewed demand after the Bank of England fell short of its intended quantitative easing (QE) purchase targets. There were simply not enough sellers in the market. Government debt recovered from historic lows, while this also helped the pound sterling claw back about 0.5% against the softer dollar.
Some analysts continue to see a broad upward trend for the dollar, however, which could hold back gold prices between now and election day.
Wall St Stalls
Stock futures in the U.S. appear to be pointing ever so slightly higher on Wednesday morning as the head-scratching rally in equities amid another abysmal earnings season may finally be losing steam. After the S&P 500 and the Nasdaq indices both notched new all-time highs yesterday, most analysts expect Wall St to open flat today.
The new highs have come in quick succession for the benchmark U.S. stock indices: in addition to a record-high close for the tech-heavy Nasdaq, the S&P has already seen new intraday highs on four separate occasions in August—and we're only a third of the way through the month.
With low interest rates seemingly here to stay for longer than anticipated, traders are generally bullish. The gains are also being helped by unusually low volumes that amplify smaller moves. Global stock markets have similarly seen thin volumes, helping Germany's DAX index finally re-enter a bull market. How long this can be sustained amid a generally mediocre outlook for the world economy, coupled with widespread uncertainty, remains to be seen.
Weak productivity in the U.S. will also likely put a damper on stocks (if any logic remains in these markets). Crude oil prices continue to fall, prompting some producers to once again float the idea of freezing output in order to support higher prices. OPEC and Saudi Arabia are at the center of this discussion considering that the month of July saw record output for Saudi oil at nearly 11 million barrels pumped per day.
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.