Following the 4th of July holiday, the precious metal prices continued a slump that dates back to last week but became especially dramatic on Monday. Spot gold only slipped about 0.1% this morning before turning positive to move back above $1,220/oz, recovering slightly from its lowest level in over three months. Meanwhile, spot silver was down far more sharply, losing 1.1% to threaten to fall below $16 per ounce for the first time this calendar year.
Platinum was essentially unchanged while palladium tumbled 1.2%.
Since you may have lost track with the unusual midweek holiday break, here are Monday's closing numbers:
Gold: $1,219.70/oz (-$21.50, -1.73%) Silver: $16.11/oz (-50¢, -2.98%) Platinum: $904/oz (-$20, -2.16%) Palladium: $844/oz (+$4, +0.48%)
The dollar has been trending higher this week, which has robbed the precious metals of some of their luster. The greenback was higher again in early trading, rising 0.25% on the DXY index. However, the dollar's rally has been far too modest to account for all of the losses in the metals. A plain and simple institutional sell-off seems to be the culprit, as net long contracts in gold futures dropped for the third consecutive week.
This is likely an indication that hedge funds and other big financial firms are cutting their gold positions as they adjust to the new hawkish outlook for interest rates around the world. Everyone will eagerly await the release of the most recent FOMC meeting minutes at 2 pm EST this afternoon for any clues about how the Fed will proceed in an improving but still uncertain economic environment.
Stock futures pointed higher in the U.S. on Wednesday morning, while the 10-year Treasury yield was steady around 2.35%. There is some concern that the housing market has remained stagnant even as other signs of economic recovery continue to be checked off the list. Homebuilders and prospective home buyers remain cautious with memories of the last housing collapse still fresh in everyone's minds.
President Trump is traveling to Poland on his second overseas trip since taking office. He will receive a warm welcome in Eastern Europe before attending the G20 meeting this week where he is expected to meet face-to-face with Russian leader Vladimir Putin for the first time.
Speaking of Russia, crude oil prices were down this morning, snapping their longest streak of winning sessions so far in 2017. This was partly due to Russia's rejection of deeper production cuts, as its economy relies heavily upon energy exports. There are reports that during his visit to Poland, President Trump will attempt to make a deal to export more U.S. natural gas to the country as it tries to diversify away from Russian energy imports.
In Europe, major stock indices in London, Paris, and Germany were all about 0.1% higher this morning. Signs point toward an improving outlook for the eurozone, where the Purchasing Managers' Index (PMI), which measures activity in the manufacturing and services sectors, was steady in June. This suggests to economists that the region's economy expanded 0.7% during the second quarter. In fact, European companies are finally expanding to the point that demand for labor is outstripping supply.
North Korea displayed its own "fireworks" during the Independence Day holiday, claiming to successfully test intercontinental ballistic missiles (ICBMs) for the first time. This latest show of military might could provoke a reaction from the United Nations, although the North Korean regime is already heavily sanctioned and isolated from global markets. At any rate, the fear of an escalating conflict could propel gold to its first winning session in four days.
In other economic news that could impact the platinum and palladium markets, Volvo is claiming that all of its newly manufactured vehicles will have electric engines by 2019. This is an even more ambitious goal than originally outlined by European emissions-standards regulations that will take effect next decade. (Volvo is Chinese-owned but still Swedish-operated, and Europe is its primary market.) The move is seen as yet another step in a revolution in the automobile industry toward electric and hybrid cars, which is exemplified by the electric-only automaker Tesla.
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.