Gold Basks In Rays Of Weaker Dollar

Weakness in the U.S. dollar is pushing the markets around today, and gold is especially benefiting. In mid-afternoon trade, gold is up around $12.00 of which almost $10.00 is due to the sagging dollar.

The euro hit a five-week high against the greenback. The yen, which a year ago was trading at 125 per dollar is in the 100–101 range on the day. The British pound continues to surprise (recently), as the old-school currency gets up off its back after the Brexit knock down.

For a while crude was up slightly on the weaker dollar but as the afternoon session lengthens, the old worries of overproduction and a glut already in the storage tanks began to worry traders.

West Texas Intermediate is down 1.20% to the $39.60 area while Brent North Sea is trading in the $41.90+/- range. Gasoline was up a smidgeon but it remains down about 10% over the last month.

Although exchange rates favored the yen today, the Nikkei was unimpressed by the announcement of a $132 billion fiscal stimulus. It does seem a bit paltry from our vantage point. More details are needed.

Elsewhere in Asia, Shanghai rose, taking some business action from Hong Kong, which was closed because of a typhoon warning.

Europe slipped and slid because of crisis in the euro zone’s banking industry, during which banks have failed the so-called stress tests imposed upon them by various central banks, including the European Central Bank (ECB).

On top of that, the Swiss bank UBS ended down 6% after a leading Zurich-based Sunday newspaper cited expert estimates that UBS and Credit Suisse could face 2 billion Swiss francs each in fines from U.S. regulators due to the misrepresentation in the selling/bundling of mortgage-backed securities.

Credit Suisse is also about to be removed from the STOXX Europe 50 index next week, sending shares in the bank into a tailspin of Europe's benchmarks.

On the day, it was not unusual to see stock price losses for European banks down 6 to 14%.

This situation has had an adverse effect upon U.S. stocks. This is due, of course to the energy price tumble but today the shakiness of the banks in Europe became a severe drag in New York.

The Dow is off 0.50%, S&P 500 by 0.60% and the NASDAQ has tumbled 0.85%.

While we can look for temporal issues such as bank problems or oil, the underlying issue is growth, or the lack thereof in the developed world. Credit is still too illiquid by perhaps two times.

Wishing you as always, good trading,