Gold Rises As Equities Take A Breather And Dollar Strength Subsides

Gold found help in a mildly weaker dollar and semi-enthusiastic regular trading. It added up to a modest 0.80% gain on the day. Silver was up around 1.15% and ever-eccentric palladium rose 2.80% on the day.

Stocks in the U.S. are wavering between gains and loses without any truly clear sentiment prevailing. The fed’s Beige Book that treated with economic conditions across the country from mid-May through the end of June described moderate growth, almost no price pressure and extremely modest wage pressure, most of which was confined to the Cleveland, Chicago and San Francisco areas.

Prices seem as far away as they have been since 2009 from the desired 2.00% inflationary growth the Fed is looking for.

Wall Street is puzzling it all out as it prepares for the next FOMC meeting at the end of July. Thus the breather.

Aside from the apparently permanent “modest growth,” equities in the U.S. were struggling against another blow to crude oil prices brought on by a U.S. government report that said there was a smaller-than-expected crude inventory draw for last week.

Crude inventories fell 2.5 million barrels in the week ending on July 8, half a million barrels less of a drawdown than analysts predicted.  The International Energy Agency (IEA) warned again that an intractable supply glut worldwide was threatening market recovery.

Beyond the crude draw, distillate stockpiles rose 4.1 million barrels much, much more than expectations for a 256,000-barrel increase.

Gasoline stockpiles rose unexpectedly by 1.2 million barrels, compared with forecasts for a 432,000-barrel drop. That is an enormous swing. There was also a gigantic build in home heating oil reserves.

West Texas Intermediate and Brent North Sea were both trading off by about 4.00% at settlement.

It’s a tribute to the muscularity of the equities markets that oil did not knock a per cent or more off stock prices.

A risk-off day frame of mind helped push down bond yields and lured some players into buying yen as haven moves.

Yet all the scuttlebutt says that we are nowhere near finished with the secular bull market that has been driving stock prices up with the exception of China. The Shanghai has been hanging around the 3000 level for most of the year although it is off its lows of 2638 in late January.

Therein lies the big story behind the skittishness reflected in other indexes. But perhaps the rest of the world has finally decided that a lumbering China and long-term low oil prices can be coped with.

We expect the equities party to rev up again at any time.

Wishing you as always, good trading,