Gold prices strengthened in Europe overnight, as financial stocks were dragged down by more Deutsche Bank drama. As par for the course, precious metals gave back some of those gains on the New York open. Gold prices are rising in Europe as the British pound and euro are both being pushed lower on fears of the economic consequences of the "hard Brexit" UK Prime Minister Theresa May has outlined.
Spot gold is trading marginally above Friday's $1,257/oz close this morning, while spot silver prices up 0.75%. Traders are closely watching bullion today, to see if it can recover from the worst one-week loss in three years.
Barbara Rockefeller at FXstreet notes this morning that speculative shorts continue to pour in against the euro and the pound. GBP shorts hit another all-time record today, as traders see no end in sight for the sterling's fall. Bearish sentiment in the pound market is being stoked by British prime minister Theresa May's public announcements that her Tory government will be pushing for a "hard Brexit" -- not trying to finagle special concessions from the European Union. British retailers are complaining that the plunging pound is causing inflation for consumers.
The dollar is back on the rise, after giving up early gains Friday to close with a loss. Not only are a weaker euro and pound lifting the greenback, the Chinese government today set the yuan trading band at a six-year low. A rising dollar depresses the cost of gold in dollars, while making it more expensive overseas.
The Wall Street Journal notes that banks are playing a lesser role in forex markets, due to regulations put in place after the 2008 global financial crisis. In 2014, banks comprised 61% of the global forex market. During the first half of this year, it was only 44.7%. Large trading firms using millisecond-quick high-frequency trading algorithms are capturing a larger share of the forex market. Some economists say that they are producing an illusion of market liquidity, and increasing volatility.
Wall St lost ground Friday to close the week in the red, snapping a three-week winning streak. A non-farm payrolls report that was lower than expected dampened trader sentiment, though some economists thought it was still an "OK" number. This is the third month in a row that the pace of new job creation has fallen compared to the previous month.
The Man in the Kremlin was jawboning crude prices higher today. Speaking at the meeting of the World Energy Congress in Istanbul today, president Vladimir Putin said that Russia would "support" any decision by OPEC to freeze, or even curtail, oil production. Muddying the waters a bit, Saudi Arabian energy minister Khalid al-Falih told an audience in Istanbul that OPEC must be careful not to restrict production too much, else it could cause a price shock in global oil markets.
Both West Texas Intermediate and Brent futures are more than 3% higher this morning. WTI is solidly above $51 a barrel, while Brent is closer to $54 than it is $53.
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