For gold bugs, and even for their lesser brethren in silver, not only is the sun shining in the summer months, but the sun is truly shining on gold as a confluence of factors helps to propel the precious metal ever higher, and one wonders when the angst laden doom mongers will appear forecasting an overbought position.
Gold has been undermined by rising government bond yields owing to major central banks generally turning more hawkish while the still-buoyant equity markets means there has been reduced demand for the perceived safe haven asset.
Gold has been undermined by rising government bond yields owing to major central banks generally turning more hawkish while the still-buoyant equity markets means there has been reduced demand for the perceived safe haven asset.
Do you remember the halcyon days when rising interest rates and increasing interest rate differentials were the precursor to a stronger currency?
It is going to be a big week for the markets this one, especially towards the end of it. Among other things, we will have the UK’s general elections, the ECB’s latest policy decision and former FBI Director James Comey’s testimony all to look forward to on Thursday.
Last week was a bad one for the US dollar. Market participants questioned whether it was premature to assume a June rate rise was forthcoming and that the path of future interest rate rises would be the same as those as set out by the FOMC’s projections.
The dollar buying witnessed at the start of the week was driven by rising expectations about a June rate hike following last week’s FOMC statement and a solid US monthly jobs report.
Commodities price are firmer today with base and especially precious metals ending a bad run off losses, while crude oil has extended its gains from the day before when it rallied sharply on the back of the weekly US oil inventories report.
Whilst gold and silver have a relatively close relationship in terms of associated price action, in the last few weeks these relatively close bedfellows have diverged somewhat, with silver continuing the bearish sentiment initiated in mid April, whilst gold pauses and reflects, with neither metal appearing to benefit greatly from recent weakness in the US dollar (UUP, quote).
The dollar has been trending lower ever since the turn of the year. This has been because of the unwinding of the bullish positions that had been accumulated before and after the US election in part as investors began to question how much of the promised fiscal spending President Trump will actually deliver and how this may impact growth and inflation, and in turn interest rates.
