Gold was higher in London trading ahead of the market open in New York today, after showing strength yesterday in the face of the dual headwinds of a stronger dollar and weaker oil prices. The dollar index is being supported by short covering, a small pullback in the euro, and the effects of massive money printing in Japan, where the yen hit a two and a half year low against the dollar and a three year low versus the euro. Oil is seeing some continued profit taking after an impressive run.
In other Asian news, the Chinese Central Bank released a statement that it sees the economy to be "relatively strong" going forward, but is paying close attention to inflation and real estate costs. Stocks in China logged gains for the eighth straight day, the best streak since the end of last February. Chinese stocks are up from a three-year low in December.
In Europe, German manufacturing orders were up 0.8% in December, more than expected. This lends more support to the sentiment that the European economy has hit bottom and is starting to recover. All is not sunshine and roses, however, as political trouble in Italy and Spain continues to affect their bond sales, with yields rising for both nations. The European Central Bank meets tomorrow, but is not expected to cut rates. In contrast to the ballooning balance sheets of the Fed and Bank of Japan, the ECB balance sheet has been shrinking, as European banks repay emergency liquidity loans granted by the ECB at the height of the financial crisis. Though the ECB is not expected to change rates, markets will be hanging on every word of ECB chairman Mario Draghi's speech after the meeting, hoping to glean hints as to what the central bank's future plans are.
The PGMs (platinum group metals) continue to show strength, as platinum hit a 16-month high and palladium hit a 17-month high in early trading. Stockpiles are expected to dwindle as the Chinese and U.S. economies recover, and rising expenses lead to more closure of platinum mines in South Africa. South Africa accounts for nearly three quarters of global platinum production.