Housing starts in the U.S. posted a surprise increase this morning, but the gains were in multi-family housing instead of single family homes. Gold dipped briefly on the news, the dollar saw some momentary support against a strong yen, and the stock markets just shrugged.
Silver eased overnight, and is down 1% this morning around the $19.35 mark. Platinum is flat, and palladium is holding on to a $5 jump it got on the COMEX open.
Buzz is increasing about the large amount of money flowing into U.S. Treasuries yesterday The yields on the long bonds (10-year and 30-year) have taken a dive as the demand pushes prices higher. The yield on the 10-year note dropped under 2.50% yesterday, despite signs this week that inflation spiked from last month.
In an environment where the stock market is supposed to be the only game in town, big players are quietly moving into U.S. bonds. Various theories have been put forward for the reason, from large funds moving out of an erratic stock market, to investors dumping European bonds (especially those from distressed nations like Greece) in preparation for quantitative easing by the ECB, to weakness in both the EU and Chinese economies.
The yen is at a three-month high against the euro and a two-month high against the dollar, as both Western currencies weaken and safe haven demand in Asia grows. Reports out of China are that the number of bad loans is now at a nine-year high.
Perhaps the most interesting development for gold today is Narendra Modi's alliance winning a landslide victory in India, riding a wave of public anger over a faltering economy and widespread corruption in the ruling Congress Party. Rahul Ghandi, whose family has controlled India since the nation's independence from Great Britain in 1947, conceded defeat last night, in the worst election result for his party in its history.
Modi, leader of the Hindu nationalist BJP party, campaigned on a pro-business and anti-corruption platform. One of his promises was to ease some of the unrelenting restrictions on the import of gold, including a 10% import tax. The previous government clamped down on gold to fight a crippling trade deficit, but the money still flowed out of the country in the black market.
Any relief to the jewelry sector will likely have to wait until Modi forms his new government. Until last year, India was the world's largest importer of gold, where it has served religious and financial purposes for many hundreds of years.