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Precious Metals Consolidate as Dollar Rises

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Precious Metals Consolidate as Dollar Rises

A slightly stronger U.S. dollar knocked the precious metals modestly lower on Wednesday.

Technical traders are following a consolidation pattern in gold after the metal recently ran up to four-month highs. The gold price was down slightly (-0.15%) to $1,336 per ounce in early trading.

Gold is up 5.75% over the course of the last month, leading to some profits being taken off the table.

Platinum crept 0.6% higher to cross back above $1,000/oz while palladium gained $9 (+0.8%) to $1,095/oz. The silver price lost 7¢ (-0.45%) to trade at $17.11/oz.

Dollar Reverses Direction

The movement in the metals basically mirrored the action for the USD. The dollar finally traded higher this morning, adding 0.33% on the DXY index for a reading of 90.7.

This caused the euro and yen to fall by the same percentage, trading at $1.22 and ¥110.8 per dollar, respectively.

Stock futures pointed higher on Wednesday. Wall St opened higher yesterday only to give up all its gains and close in the red by the end of the session. Equities were steady in the eurozone while shares were mixed overnight in Asia.

Industrial Data Offers Encouragement

U.S. markets got a lift from December's industrial production data released by the Federal Reserve. Output increased by nearly 1% during the month, beating expectations. Year-on-year, production rose 8.2% during the fourth quarter.

The jump in industrial output was led by mining and utilities, although manufacturing showed little growth. The manufacturing sector benefited from a weaker dollar throughout 2017.

Still, increasing indebtedness across the global landscape suggests that less and less effective Fed policy should continue to lift gold in spite of any near-term pullbacks.

Commodities lost ground due to the stronger dollar. Crude oil prices were only down modestly as WTI crude traded at $63.70 per barrel, still slightly in the negative for the week so far.

Bitcoin Slump Continues

Cryptocurrency prices slumped yesterday as many altcoins saw as much as 40% of their value vanish in trading. The losses are partly being attributed to tighter regulation and news of a potential ban on crypto trading in South Korea.

Up to now, South Korea has been one of the major hubs of demand for altcoins. The approaching expiry of the first bitcoin futures contracts (XBT) is also driving widespread selling.

This caused bitcoin (also abbreviated BTC) to slip below the $10,000 mark for the first time since December 1st. Prices have halved from their record high just one month ago.

The comparison between bitcoin and other historical asset bubbles provides a strong case for the market to correct from a prolonged period of irrational exuberance. The chart above from Bloomberg makes for compelling evidence.

Bitcoin prices lost another 18% early during Wednesday's session.

Meanwhile, the annual meeting of financial juggernauts hosted by the World Economic Forum in Davos, Switzerland begins next week.

President Trump is scheduled to give a speech on the last day of the gathering on Friday.

 

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.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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