The precious metals slipped from their highs on Monday morning but remained slightly above unchanged when markets opened in New York.
Spot gold traded about 0.3% higher this morning, just shy of $1,234/oz. Meanwhile, spot silver was just a pip higher (+1¢) as it approached $17.50/oz. The Platinum Group Metals were each trending 0.2% higher.
Treasurys saw significant demand on Friday, which sent 10-year yields sharply lower to 2.50% when trading opened on Monday. A more pessimistic and protectionist outlook for global trade (see further down for more) has countered the signs of higher inflation to drive investors back into government bonds, at least for the time being. Stock indices were mixed around the globe while shares in the U.S. opened lower.
As is invariably the case, the energy markets are exerting a strong pull on the broader economy as attention begins to turn away from the Federal Reserve and interest rates. The continued build-up of the U.S. supply of crude has more than countered the production cuts agreed to by members of OPEC. The Bakers Hughes rig count showed a rising number of oil rigs in the U.S.—the highest in 18 months. At the same time, OPEC nations like Saudi Arabia and Libya are actually beginning to ramp up their oil output again. All of this has combined to drive prices lower.
On Monday, WTI crude was down 1.5% to just $48/bbl. Brent crude, the oil benchmark for much of Europe, was about 1% lower to $51.25/bbl. Moreover, the drop in prices can be attributed to the apparent capitulation by traders who were long on oil. The flood of selling in oil futures will likely continue as the prospect of higher prices fades.
Dollar Falls After G20 Surprise
The U.S. dollar was about flat at 100.3 on the DXY index this morning, but the greenback lost ground over the weekend due to a surprising signal coming from the G20 meeting of finance ministers from the world's leading economies.
Responding to the wave of political populism and trade protectionism that is sweeping the Western world, the G20 representatives made an unprecedented decision: the group dropped its mission of promoting free and open global trade for the first time in a decade. Although this omission is more symbolic than anything else—it's not as if these meetings will simply stop taking place altogether—it still shocked investors. The dollar fell to a six-week low following the gathering.
As populist candidates and parties continue to perform well in elections across Europe and the U.S., the impact this shift will have on the workings of the world economy still remain unclear. This ought to support demand for gold as a safe haven, particularly if trade is disrupted by the protracted Brexit battle between the U.K. and the European Union.
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