Gold trading steady in an increasingly complicated national and international scenario

DAILY MARKET REPORT

Gold is trading steady at $1316 after hitting an overnight low of $1305 in Asian and European trading. Silver is up 9¢ at $16.5p. The precious metals are reacting to a mix of news this morning that includes advancing oil prices, a weaker than expected producer price index and a falling dollar.

Iran weighs heavily on all markets this morning with oil hitting a three year high at over $70 per barrel. Though the sanctions aspect of the Trump decision may turn out to be a non-starter (China and the European Union – the two largest destinations for Iran’s oil – are unlikely to participate), there is the greater danger of the U.S. deploying militarily to enforce those measures, or an overt Iranian retaliation of some kind.

As for the inflation outlook, weaker producer prices, i.e., the absence of inflation, is likely to figure into the Fed’s interest rate deliberations. Yield on the 10-year Treasury this morning topped the 3% benchmark once again and the dollar index is dropping precipitously.

All in all, a complicated set of circumstances that encourages a watchful eye. . . . . . .There could come at some point a flash point (or flash points) that leads to a cascading response in financial markets and it could come from any one of several potential sources.

Quote of the Day
“Why then is so much writing on the subject of money so needlessly complicated, with dense, impenetrable language and equations that make sense to only a handful of academicians? And why do so many people insist that bad ideas about monetary policy, like ‘inflation is needed to increase employment,’ are as settled and unassailable as scientific principles?” – Steve Forbes and Elizabeth Ames, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It

Chart of the Day

Chart note: The gold price remains above its rising trend line since early 2016 and technically still showing signs of a possible breakout. “[S]ince bottoming in December 2015,” says a recent NASDAQ report on gold, “there has also been a clearly defined rising support line which is now converging very closely towards the 1,345 resistance. Typically this implies a breakout, up or down, is likely to occur soon. Given the long duration and size of this consolidation which strongly resembles a head & shoulder bottoming pattern, a breakout would likely to be accompanied by strong, accelerating momentum. And while the dollar has shown strength over the last three months, it looks more like a relief rally following 2017’s sharp decline. In time if the dollar resumes its downtrend, that could very well be the trigger for an upside breakout in gold which could be quite powerful.”

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