Lots of bullish news for gold this morning, as the yellow metal is set to post its third straight week of gains.
Firstly, China caught everyone by surprise by announcing cuts in benchmark interest rates, and promising to inject liquidity into the market to alleviate a credit crunch.
This was followed by European Central Bank president Mario Draghi vowing the the ECB would move quickly to reverse deflation in the EU, and would use Fed-style outright bond purchases of sovereign debt if necessary.
These moves sent global stocks, commodities, gold, and the U.S. dollar all higher.
However, the most shocking news in the gold markets was the revelation by the Dutch National Bank that the Netherlands secretly repatriated 122.5 metric tonnes of gold from the U.S. This accounts for a full 20% of Dutch gold reserves, and brings the amount stored in New York from 51% to 31%. Major Dutch newspaper De Telegraaf quoted a DNB official as saying: "It is no longer wise to keep half of our gold in one part of the world. Maybe that was desirable during the Cold War, not now."
This news has the Germans wondering why the Bundesbank has failed to repatriate German gold from the U.S. After being convinced to not demand immediate delivery of 300 metric tonnes of gold from the New York Federal Reserve Bank, Berlin agreed to spread the repatriation out over eight years. But, instead of the 37 tonnes they were promised last year by the U.S., they only received 5 tonnes of gold Read this report by Dutch gold expert Koos Jansen for all the details.
Despite the stronger dollar and rallying stock markets this morning, spot gold is up over $9 to break the $1200 mark again. Silver is up 1.5%, and the PGMs are both up around 2%.
Yesterday in the Markets
Gold rose in overseas trading early on Thursday, and retained that strength through the day in New York. Spot gold closed up $11.40 to $1,194.50. Silver saw some oscillating in a 25-cent range above the previous close, and ended the day up .74% to close at $16.25. Platinum gained $17.00 to close above $1,200 an ounce, ending the day at $1,204. Palladium gained modestly, up $6.00 to close at $767.
The Nasdaq was the top gainer on Wall St., up a little more than one half percent. The Dow and S&P 500 edged up slightly, less than 2/10th percent, to mark new highs. Stocks had opened lower, but by noon had reached the "cruising altitude" they would hold for the rest of the day. Bad PMI news out of China and Europe early in the day was counter-acted by a report of increased industrial activity in the Mid-Atlantic states, and good existing home sales.
Crude oil was up over $1 a barrel, while Treasuries gained. The yield on the 10-year T-note dropped 3 basis points to 2.33%. The dollar was basically flat, only gaining 0.02%.
Thursday's closing numbers:
Economic News Affecting Gold
Today's a light day on the economic news front, aside from the surprise rate cut by China, and Draghi jawboning the euro lower and stocks higher. Crude oil is up this morning over a dollar for the second day, Another bit of good news for petroleum is the EPA scrapping renewable fuels mandates this morning.
Geopolitical News Affecting Gold
Of course, the market is abuzz about the "ninja gold repatriation" by the Netherlands. This is going to heighten the attention around the Swiss Gold Repatriation referendum on November 30th. To explain what this "Save Our Swiss Gold" vote is about, Gainesville Coins has teamed up with the experts at Visual Capitalist to bring you this handy infographic:
It was reported by the IMF that Ukraine, which can never seem to catch a break, sold 14 tonnes of gold reserves at the recent bottom of the market in early November to pay bills. This was 1/3 of their remaining gold reserves. When your currency is nearly worthless and your credit rating is crap, people will still accept your gold.
Massive nationwide protests in Mexico are set for Saturday. Tens of thousands of citizens are protesting against government and police corruption, by both the drug cartels and large corporations who are buying their way into lucrative government contracts. The breaking news that a company that has been awarded millions of dollars worth of government contracts built a mansion for the President of Mexico and his TV star wife to live in, has only fueled the outrage over police collusion with drug gangs in the abduction and murder of 43 students.
The protests may be infiltrated by police or military double agents, as reports have surfaced of sightings of army trucks full of young men in civilian clothes being transported into the capital of Mexico City. Protest leaders blame these provocateurs for violence in recent protests, saying these people were later seen slipping behind police barricades to safety. Worries are mounting that these nationwide rallies will become a "Mexican Spring" that could topple the present administration, and lead to economic disruption in the world's #1 silver producer.
Watch for a lot of volatility on Monday, as the big players attempt to push around the gold market ahead of silver and gold options expiry. Some "market making" banks and hedge funds may attempt to temporarily move the market back closet to the $1175 mark to turn a profit on options contracts, but there's also a lot of people holding positions around the $1200 mark. Things should settle down later in the day, unless a lot of small players get flushed out and have to dump futures contracts.
Monday also brings us the German Ifo business climate index, flash services PMI for the U.S., and a snapshot of industrial activity in the Southwest with the Dallas Fed manufacturing index.