Gold Down On Hard Charging Dollar And Cooling Stocks

A 0.6% rise in U.S. retail sales for June, blew the 0.1% rise predicted by economists out of the water. It’s yet another reminder why economics is called “the dismal science.” The rise was the third straight monthly increase. Sales are up 2.7% from a year earlier.

That led to a robust run up for the U.S. dollar as some analysts are contending that the rise in retail sales will precipitate higher U.S. interest rates. We think that one of the reasons that retail sales are so high is indeed due to price stasis and in many sectors disinflation.

There are also many people who are either first-time workers or are workers returning to the workforce after long interludes. So, there is pent-up demand but inflation has yet to be seen on the radar screen in any force.

The stronger dollar had a direct impact on the price of gold, which was off around $8.00 at 4PM in New York, of which about 0.70% was due to greenback power. Silver was off one full percent but there was a good deal of regular-trading selloff dragging the gray metal down.

The retail sales number in the U.S., plus a more optimistic set of economic data points out of China, helped push crude oil up on speculation that demand would increase.

However, as could be readily predicted, someone will be there to meet the demand. Data from oilfield services firm Baker Hughes showed U.S. producers added oil rigs for a sixth week in the last seven.

In a sign that U.S. production may be ramping up again, BH said the number of oil rigs cranking in U.S. fields rose by 6 to 357. While the count shows growth, it is a far cry from the 638 operating rigs at this time last year.

And sure – the price of West Texas Intermediate is up this week, but it is coming off a hideous low of $44.42 per barrel and now sits at $46. Better, but pricing is far from the roughly $50 per barrel WTI hit on June 20.

Worldwide, stocks were mixed to weak, with the Nikkei index coming out strongest on the day. The lack of interest in equities today in Europe is understandable given the barbaric attack in Nice.

Travel stocks everywhere were affected and the gloom, especially as we go into a summer weekend, weighed on trading. Somewhat contradictorily, financial stocks ran a bit lower than one might have presumed given that thus far all the big banks are either hitting or exceeding earnings forecasts. Perhaps the worry is about where profits are headed after such good reports.

As we head toward close, the Dow is up marginally while the S&P 500 and NASDAQ are off marginally.

Wishing you as always, good trading,