As many individual traders and trading firms are heading home for the holidays, we can expect very thin volumes on the markets this week. Such light action usually means that the markets will be a bit more volatile during this week's trading sessions.
On Tuesday morning, gold opened just slightly lower, down $1.50 per ounce to $1,077.70/oz. Meanwhile, silver and palladium were both modestly higher. Spot silver added 8¢, or better than 0.50%, to poke back above $14.40/oz. Palladium gained 1% to $560/oz while platinum was flat.
After a strong showing that saw the yellow metal gain 1.13%, gold closed above $1,079 per ounce on Monday. Silver gained 1.17% to settle around $14.35/oz. Platinum had the best performance during trading, adding 1.75% to close at $876/oz. Palladium was the only one among the precious metals to fall into the red, shaving $5 per ounce off spot prices.
The dollar closed above 100.0 on the DXY, while the benchmark 10-year Treasury note yield remained unchanged at 2.19%. It was a fairly encouraging day for stocks, as well. The three major U.S. indices advanced between 0.72% and 0.93%, perhaps kicking off a so-called "Santa Claus rally" to close out the calendar year. However, we can still expect some up-and-down action due to lower volumes and the year-end selling for tax purposes.
Factors Affecting the Precious Metals
A combination of low trading volumes (by virtue of the holidays) and mixed economic influences will likely leave the metals stuck in a sideways channel, bouncing in a range above and below neutral. Even though the thin volume means that it would take less action to cause a bigger impact on prices, it's worth noting that until something unexpected happens, the metals have no strong directional momentum at the moment. For the most part, the precious metals are caught between balanced pressures on both sides of the trade.
In connection to the general commodities rout, crude oil is looking to halt its slide on Tuesday. The results remain unclear: West Texas Intermediate added about one-third of a percent, clawing above $35.90/bbl, yet Brent crude fell again, losing about 0.45% to bring its spread above WTI to a razor-thin 25¢ per barrel. More losses for oil add downward pressure to gold prices, as well.
A big development that may help those beleaguered commodity markets is the building expectations for fresh economic stimulus from China. The Communist Party indicated it would be pursuing more reforms to its economic system, including accommodation through stimulus. The news, if it does indeed come to fruition, would be a boon for emerging markets and their currencies, which could certainly have an impact on gold by cutting into the dollar's strength and boosting commodities.
This also coincides with the upward revision of third-quarter U.S. GDP growth to 2.0%. Although this is a fairly benign reading—neither indicative of great strength or great weakness—the markets may react more so to the notion that the direction of the revision was higher. This is also the second revision to the Q3 GDP data. The main conclusion being taken from the data is that the U.S. economy remains steady if muted by only modest growth.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.