Jobless claims came in lower than the week previous, with 294,000 new applications for benefits filed. Analysts have interpreted the decline in jobless claims to show up as a boost in payrolls as well, which could stir further wage growth. With gradually improving confidence in the U.S. economy and seemingly endless dollar appreciation, dollar-denominated gold buyers, especially those with a long-term outlook, may be seeing a prime opportunity for discounted purchases of the metal relative to prices in foreign currencies. Gold hit a 1-and-1/2-year high in euros yesterday, just under €1,030 per oz, while the euro simultaneously has fallen to a decade-low against the dollar. Similarly, gold premiums have been rising in China in anticipation of the traditional gold-buying event of the Lunar New Year.
Yesterday in the Markets
Much of the free world woke in horror to the headlines about jihadist terrorists taking twelve lives in an attack on one of France's satirical magazines, Charlie Hebdo. Gunmen opened fire on the weekly's Paris headquarters, killing eight journalists, two police officers, a guest and a maintenance worker while badly wounding several more. The callous act of terror was linked to the publication's frequent and disparaging use of the image of the prophet Mohammed in its political cartoons. (For context, the bombastic magazine has taken aim at all the major Western religions in the past.) Mourning for the victims is taking place abroad, and advocates of freedom of speech have rallied in support of Charlie Hebdo. There is considerable anxiety that the massacre will bring about widespread Islamaphobia in Europe: such movements were already beginning to swell in Germany before the attacks, and France has a sizeable Muslim minority of over 5 million citizens. At any rate, the tragedy is rightly taking precedence in many people's minds over the comparatively banal goings-on of the markets. Our thoughts and prayers go out to the victims, their families, and the French people at large, who showed such support for their American compatriots following the September 11th attacks.
Wednesday saw only moderate losses for the precious metals as they consolidated from the previous two sessions' gains, while U.S. stock indices advanced about 1.25% across the board. Although WTI crude added 85 cents (+1.77%) to close just below $49, Brent crude was actually flat, bringing the spread between the two oil benchmarks closer together.
Factors Affecting Gold Today
The drop in jobless claims along with the dovish revelation from yesterday's FOMC meeting minutes that the committee doesn't expect rates to rise before April has spurred some good feelings for Wall Street. The Dow Jones, S&P 500, and Nasdaq were all more than 1% in the green by 10 am EST, perhaps poised to reclaim last week's dramatic losses. The dollar was up yet again, moving above 92.25 on the DXY index, again nearing a 9-year high. Despite the strength of the greenback and the expectations for growth in the U.S. economy, the precious metals have held their positions, with gold above $1,215/oz and silver approaching $17/oz. Platinum and palladium spot prices have also recovered to more familiar levels, above $1,225 and $800, respectively.
It is likely that the looming deflationary crisis around the world--particularly in Europe--is stoking some of the demand for precious metals, even as other commodity prices continue to drop. Germany's hardline stance on keeping austerity measures in place has been the bane of the Eurozone's fledgling Mediterranean economies, while manufacturing in Germany has showed signs of weakness as well; the longer the inflation situation, and the EU's political turmoil, remains this bad and this unclear, fears of a fiscal disaster spreading across the currency union will remain a consistent undercurrent.
In addition to safe haven buying, gold prices have also been getting a boost from robust demand expectations from India and China. China's celebration of the Lunar New Year invariably entails significant sales of 22- and 24-karat gold, while low oil prices have allowed India to ease its restrictions on gold imports. A stiff 10% import duty will still be levied, but the Modi government has at least lifted the 80:20 export rule, allowing Indian gold buyers to keep all of their purchases within the country.
Wholesale inventories for November are expected around mid-morning on Friday, but the big news will be the non-farm payrolls numbers, released as part of an aggregate report of employment data and analysis, taking into account both private and non-farm payrolls, as well as unemployment, wage growth, and average workweek hours.