DMR–Gold seesawing around $1200, but higher this morning on firming yuan, China premier comments

DAILY MARKET REPORT

Gold continued to seesaw around the $1200 mark this morning.  At report post-time, it is trading in the $1203 range and up $3 on the day.  Silver is up 4¢ at $14.23.  Overnight, gold got as high $1206 after Chinese Premier Li Keqiang was quoted on Bloomberg as saying China would refrain from devaluing the yuan to boost exports.  The yuan is also higher in early trading.

The yield on the 10-year Treasury went vertical yesterday to 3.048% on a TIC report showing a minor reduction in Chinese holdings of U.S. sovereign debt. In keeping with Li Kequiang statements this morning, China might be forced to sell U.S. government paper in order to defend the yuan.  Yield on the 10-year is even higher this morning at 3.074%, an indication that the market has not backed-off from yesterday’s assessment. Julius Baer’s Norbert Ruecker told Reuters this morning that “Overall, we are constructive for gold and we are telling our clients to start to build a long-term position. Negative sentiment and positioning looks like it has hit rock bottom, so this will start normalizing and support gold.”

Chart courtesy of TradingEconomics.com

Quote of the Day
“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – William Strauss and Neil Howe, The Fourth Turning

Chart of the Day

Chart note:  The CBOE SKEW Index signals when option traders are concerned about a black swan event.  In August, the SKEW hit its highest level since inception in 1999.  Since then it has backed-off marginally, but the trend in sentiment and the danger signal remain intact. 

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