Gold Hurt Again By Risk Appetite In Equities

Gold is off around $8.00 today, but the heart of the story is that the price point reflects a nearly $3.50 positive assist from a weaker U.S. dollar. Otherwise gold would have been off $11.00 in total. Silver was also off today as it too felt the sting of hungry stock investors.

The cheapening of the dollar has been with us for a year. Last July/August, it took almost 1.25 dollars to buy one yen. Today that number is between 1.00 and 1.05. The euro is also up against the U.S. dollar since late 2015 although not nearly as much as the Japanese currency in percentage terms.

The bull seems to be off and running hard everywhere, although the London FTSE and the Shanghai did not join today’s trade-a-thon.

The German DAX and French CAC were strongest across the world’s Bourses, but the Nikkei was close on their heels.

The U.S. indexes were pushing up although by per cents they have not risen as much as Asia and recently. It should be noted that the other two regions have had more room to grow, whereas the trading in New York has been subdued as we either near or push higher into record territories.

The S&P 500 hit a fresh intraday high and the Dow Jones Industrial Average was up about 130 points in midafternoon.

A number of factors were in play.

The Bank Of England held rates at 0.50% for the overnight while hinting strongly it was ready to cut or stimulate again as the situation warranted. Financial stocks gained in New York on the comments.

Crude oil, which was beaten into submission yesterday, was up 2.00% (West Texas Intermediate) at settlement but has since fallen back as afternoon trading continues. Nevertheless, the bump after yesterday’s debacle was helpful to stock prices.

Additionally, we’re about 2/5ths of the way through earnings reports for the second quarter and we are seeing about 65% of companies reporting a beat with another 25% showing that they met their projections.

That gives investors reason to be more optimistic about the rest of the year.

More proof that it was a risk-on day came from the entire worldwide bond sector – U.S., German and Japanese – all of which saw yields rise and face prices fall. Traders and mark setters were trying to lure players in.

Like gold and silver, however, bonds were struggling to find their raison d’être in an equities bull market.

Wishing you as always, good trading,