Gold Prices Slump Again As Equities Continue Rally

As the saying goes, “There’s no fighting city hall.” For gold, we can extrapolate by saying, “There is no fighting economic strength in the U.S. economy.”

Gold fell by $16.40 an ounce, the preponderance of which came via regular trading, although a stronger dollar slightly helped push down the yellow metal. The loss was around 1.25%.

Silver fared worse. Spot prices shrank 2.50%. Only maverick palladium was up in the precious metals complex, forging ahead 2.60%.

The overall dollar index reached a four-month peak because there are more eyes on an end-of-year rate hike by the Federal Reserve. The FOMC meeting next week will garner plenty of attention as we go back into tealeaf reading mode. It’s worth noting that after this confab, the next FOMC meeting will not happen until September 20th. That gives the financial world a nearly eight-week hiatus when they can stew in their own juices.

Aside from yesterday’s stupendous rise in housing starts, there is a solid earnings season that has surprised many analysts. Financial institutions are leading the charge to record ground. 

Banking corporation profits continued to amaze Wednesday, with Morgan Stanley reporting earnings of 75 cents per share against predictions of 59 cents. Morgan Stanley joined Goldman Sachs, Citigroup, JPMorgan Chase and Bank of America jumped on the bandwagon of financial companies exceeding Q2 profit forecasts.

Additionally, yesterday Microsoft reported earnings that were 11 cents above expectations, 69 versus 58 cents per share. That’s 19.00% above calls.

Europe was very strong today as it appears likely (for now) that the Brexit talks will help smooth the transition of the UK’s divorce from the continent. We shall see.

Asia was mixed with the Nikkei and Shanghai off on slowing rally momentum and Hong Kong up on financial institutions’ strength.

In energy, we saw a dip for the ninth consecutive week in U.S. crude inventories. That we are coming off record high inventory levels keeps oil prices from pushing much higher, as does the almost instant availability of “new” oil.

Interestingly, stockpiles of gasoline in the midst of the peak American driving season rose by 900K barrels. The build comes at a time when gasoline production is slightly in decline, perhaps with an eye toward summer’s end already.

Driving the markets right now is a macro current as electric and exciting as any we’ve seen in a while. The U.S. economy and its equities are outperforming by any standard. This is drawing money into not just U.S. stocks but into the dollar and, for what it’s worth, the U.S. Treasury bond market.

The world likes U.S. monetary policy and the safety of U.S. assets, a tradition that has reasserted itself in the present.

Wishing you as always, good trading,