Gold and crude oil are both on the rise this morning following the Valentine's Day weekend, as the markets show a little love for commodities on what promises to be a fairly uneven trading day abroad: U.S. markets are closed for the President's Day holiday, while European and Asian markets are diverging this morning. The latter is on the rise, with some encouraging news from China and Japan, while the former remains hesitant with the Greek and Ukrainian problems still looming. Gold opened about $5 higher at $1,232/oz, while silver was unchanged in early trading.
Yesterday in the Markets
On Friday, the dollar slid back slightly, settling just above 94.0 on the DXY index. U.S. stocks rose at or near new all-time highs, as all three major indices ended in the green. Meantime, precious metals staged a modest recovery to cap a week of steep losses.
Factors Affecting Gold Today
Crude oil is continuing to rise, defying the myriad bearish bets across the market. Far from conforming to analysts' calls for a new bottom in crude, prices rose again thanks to a series of developments that are eating into the industry's supply glut. The violence and unrest in Libya, one of the world's leading producers, is providing some support for oil prices, as Egyptian forces attempt to root out Libyan militants who have aligned themselves with the so-called Islamic State. This has all but shut down the Libyan oil fields, while also raising fears that regime instability and a diversion of resources to military operations could cause further disruptions to normal petroleum production. On the other side of the Atlantic, continued idling of U.S. oil rigs is also contributing to the rebound in prices. WTI crude was nearing $53/bbl this morning, while Brent crude remained just short of $62/bbl.
Asian stocks were up across the board this morning, responding to Japan's emergence from recession to begin the new year. The world's third-largest economy has experienced economic stagnation since the late 1990s, leading to Prime Minister Abe's momentous decision to "reflate" the economy with ambitious monetary stimulus. Although many experts envision another round of QE from the Bank of Japan at some point later this year, it seems more likely the BoJ will hold off any further devaluing of the yen in order to shore up the country's abysmally low consumer sentiment. Elsewhere, China is negotiating a similar quandary: though many analysts expect the People's Bank to institute more economic stimulus through easing its monetary policy, the Chinese are also concerned about devaluing the yuan. The PBoC doesn't want their currency to drop any further, as this would make it more difficult for Chinese corporations to pay back their mounting debt to the Bank of International Sentiments. The yuan has slid to a 27-month low against the dollar, shedding 3% from its high last year, while China's total debt owed to the BIS currently exceeds $1 trillion.
In news that comes as a surprise to virtually no one, the Royal Bank of Scotland is anticipating another £10 billion (~$15.4 billion) in fines relating to the bank's rigging of foreign exchange markets, as well as its involvement in peddling toxic mortgage-backed securities in the U.S. markets. The U.K.'s largest state-owned lender is still feeling the brunt of its punishments from regulators at a time when most of the other major culprits in the various market manipulation cases have largely put these fines behind them.
The Housing Market index will be released tomorrow morning, as well as data for e-commerce retail sales in December. The important Empire State Manufacturing survey will be announced at 8:30 am EST, while the Treasury International Capital (showing financial capital inflows and outflows from the U.S.) for December comes out late in the afternoon.