The precious metal markets are continuing their downward slide to begin the fourth quarter as spot gold fell below the $1,260/oz mark on Thursday morning. After Tuesday's precipitous drop, the yellow metal has trickled lower still due to a stronger U.S. dollar and surprisingly low weekly jobless claims.
Silver prices slid even further, losing about 1.5% to trade around $17.50/oz by 10 am EST. The Platinum Group Metals sank in tandem with no benefit from industrial demand. The platinum price lost almost 1% to trade around $970/oz while spot palladium was about $12 per ounce lower at $670/oz.
With so many long positions in gold futures being unwound, the selling pressure in the gold market has been especially strong. Although this will keep a lid on precious metal prices for the time being, the market could swing back just as quickly pending some troubling economic news or political uncertainty.
Jobless Claims Fall
The markets are taking this morning's unemployment data as a sign that the labor market is continuing to improve incrementally. The Labor Department reported 5,000 less filings for initial jobless claims last week, the lowest since April. Over a four-week moving average, first-time jobless claims are now at a four-decade low. Continuing claims—people who have filed for unemployment and still have not secured a new job—also fell to their lowest in over 15 years. As a result, the national unemployment rate remains below 5.0%. Moreover, this is the 83rd straight week in which this measure of joblessness came in below 300,000, which is seen as a benchmark for a healthy job market.
The dollar gained against a basket of its peer currencies again on Thursday, adding 0.4% on the DXY index. The reading of 96.5 is the highest for the greenback since late July.
The Japanese yen lost ground again this morning, perhaps bringing a halt to weeks of strengthening since August. This is welcome news for the Bank of Japan, which has seen safe haven demand for the yen interfere with its plans to boost the economy through stimulus measures. The currency traded at about ¥104 per dollar.
The British pound sterling also tumbled again, losing about 1% to trade at just $1.26, its lowest against the dollar in over three decades. The news that Theresa May, the new prime minister of the U.K., will pursue a "hard Brexit" that cuts virtually all ties with Europe has helped push the sterling lower—but may actually help make the British economy more competitive in the meantime. May has indicated that she will invoke Article 50 to pull the country out of the EU by March of next year.
Although Wall St opened slightly in the red, the markets appear to be in risk-on mode as encouraging economic data continues to be reported. Evidence of this lack of risk aversion can be seen in the Treasury market, where the 10-year T-note yield has risen to 1.74%. This is still an historically low level that reflects the ultra-low interest-rate environment around the world, but the 10-year yield has risen 10 basis points since the beginning of this week.
Crude oil prices have also seen some support this week, with WTI crude moving back above $50 per barrel for the first time since mid-June. Brent crude was also 1% higher to $52.30/bbl.
Traders will closely watch tomorrow's announcement of non-farm payrolls data tomorrow for more clues about how the U.S. economy is performing.
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