Wednesday looked to be another tough trading session for the precious metals as safe havens have been losing investor appeal across the board. Spot gold was down $3 this morning to just $1,273/oz, approaching a three-week low. The silver price slipped 5¢ (-0.3%) to $16.86/oz.
Meanwhile, platinum was down 0.75% to about $915/oz and palladium nudged into positive territory above $955/oz.
Similarly, the sell-off in U.S. bonds continued, with the 10-year Treasury yield hitting 2.46%, its highest in seven months. 10-year bonds in Germany and the U.K. also hit fresh lows with their highest yields in months. The markets appear to have shifted into "risk-on" mode to take advantage of the earnings season rally for the heavy hitters in the stock market. At the same time, however, the S&P 500 (generally considered a better measure of the broader markets) trended lower again on Wednesday.
The immediate impetus for the wave of selling in the gold market was the Department of Commerce reporting that durable goods orders rose 2.2% during September, coming in far above expectations. The data squared well with this year's rebound in U.S. manufacturing, which is no doubt helped along by the weaker dollar, which makes American exports cheaper around the world. The dollar was flat this morning at 93.8 on the DXY index.
Investors will be watching closely as the European Central Bank (ECB) meets tomorrow. The ECB faces a similar decision to the Fed: Should it begin normalizing policy now, or leave stimulus measures in place for longer? Which way the central bank chooses to go will have an acute effect on market action to close out this week. On Friday, the first estimate for third-quarter GDP in the U.S. will be announced. In addition, the continued reporting of quarterly earnings on Wall St can be expected to have a strong impact on short-term trading.
There is still uncertainty regarding who President Trump will name as his nominee to be the next Federal Reserve chair. The noted hawk John Taylor has been gaining momentum according to sources close to the president, but many believe Jerome Powell is still the overwhelming favorite for the job because his close alignment with the views of the current chair, Janet Yellen, is taken as a sign that the transition will be much smoother if Powell is named. He is seen as the candidate with the easiest path to receiving Senate approval, as well.
Speaking of the Senate, the upper chamber voted to repeal rules that allow consumers to file class-action lawsuits against financial institutions. Instead, such cases would once again be handled by individual arbitration. While some critics, such as the Consumer Financial Protection Bureau (CFPB) that wrote the class-action rule, characterize individual arbitration as too advantageous for banks and credit card issuers, a return to this procedure is simpler, quicker, and doesn't result in exorbitant legal fees. The measure already passed the House of Representatives and is expected to be signed into law shortly. The Senate vote was actually a 50-50 tie, but because the vice president is technically also the president of the Senate, Vice President Pence cast the tie-breaking vote in favor of the bill.
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