The precious metals experienced some volatile action early in Wednesday's trading session. When markets opened in New York, spot gold was up $3 per ounce to $1,225/oz while silver prices were 10¢ higher (+0.6%) to $16.25/oz.
Platinum and palladium each added about $5 per ounce, following gold and silver higher. However, gold was bouncing in a fairly wide range in overseas trading before breaking into positive territory, so it's unclear which way the market will lurch today.
Gold Falls to Eight-Week Low Tuesday
Gold ended up from its session lows hit in early afternoon during yesterday's session:
Gold: $1221.10/oz (-$4.90, -0.40%) Silver: $16.16/oz (-$0.05, -0.31%) Platinum: $903/oz (-$14, –1.53%) Palladium: $796/oz (-$13, -1.61%)
Spot gold ended Tuesday at $1,221.10 an ounce, while June gold futures settled nearly 1% lower at $1,216.10/oz. Spot silver closed 5¢ lower at $16.16 an ounce, following July silver futures to its lowest close of the year at $16.07 an ounce.
Platinum contracts settled 2% lower on Tuesday, but managed to hold on at the $900/oz mark. Palladium futures fell back below $800/oz, settling 1.5% lower at $793 an ounce.
The absolute lack of fear in global stock markets has short-term traders pulling out of gold to jump on the equity bandwagon. Even reports that the North Korean ambassador to the United Kingdom said that the pariah nation was proceeding with another nuclear test had little more than a momentary effect on gold prices.
Treasury yields rose Tuesday, with the yield on the 10-year Treasury note climbing above 2.4% to hit a five-week high. Government paper is fighting for market share against a tide of corporate debt hitting the market this week.
With the French presidential elections resolved in favor of the establishment, and the S&P “fear gauge” known as the VIX at historic lows, there is little appetite for fixed income instruments ahead of the almost-certain interest rate hike by the Federal Reserve on June 14th.
Strong Dollar Pressures Gold
A U.S. dollar rally started in Europe on Tuesday, as euro profits were taken, and the yen weakened on lower safe haven demand. This is not to say that the greenback doesn’t have any organic strength. Heightened expectations of a interest rate hike next month is supporting dollar prices as well. The dollar may face some volatility of its own after the surprise announcement last night that President Trump had fired controversial FBI Director James Comey from his post.
Wall St Flat
The S&P 500 hit an intra-day high on Tuesday, but swooning oil prices sapped any strength. The S&P and the Dow both closed slightly lower for the day, while the Nasdaq charted its 30th record high (riding the back of a surge in Apple stock, as usual). Disney reported earnings, but was dragged down by dwindling subscribers to cable packages including its once-lucrative ESPN unit. Shares dipped 2.4% in after-hours trading.
When the NYSE opened on Wednesday, the three major indices were each modestly in the red, with the Dow Jones leading the way 0.25% lower.
EU Stocks Rally
The relief rally in Europe over pro-business candidate Emmanuel Macron’s victory in Sunday’s presidential elections in France got a further boost Tuesday from Germany.
Both imports and exports for the European Union’s largest economy hit monthly records, while the nation’s trade surplus swelled to €25.8 billion. This sent the German DAX 30 blue-chip index to an all-time record close. The broader STOXX Europe 600 index closed at its highest level since August 2015. French and British stocks also continued higher.
Oil Rally Snuffed Out
Tuesday’s monthly oil production outlook by the U.S. Energy Information Administration (EIA) snuffed out a two-day rally, as well as any lingering optimism of a possible extension to OPEC crude oil production cuts.
June West Texas Intermediate futures fell 1.2% to end at $45.88 a barrel. The July Brent contract also fell 1.2%, settling at $48.73 per barrel.
Raising its April forecast for domestic oil production, the EIA now sees production averaging 9.31 million barrels a day for 2017. It also raised its 2018 production estimates, raising the previous estimate by 0.6% to 9.96 million barrels of oil per day.
EIA economists also lowered their oil price estimates for the rest of the year. They now see 2017 West Texas crude selling for 3% less than they forecast last month, now averaging $50.68 a barrel. Their 2017 Brent crude price forecast is also lower, at $52.60.
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