Gold Rises on Physical Demand, Some Bargain Hunting

Two important Hindu festivals in India stirred demand for physical gold, which helped to spur higher prices in spot and futures. Since falling from its recent high on September 30th and a subsequent drop on October 5th, gold has been trading in a narrow and tightly defined range.

A slightly stronger dollar brought minor headwinds to regular trading activity, which bid gold up. After all was said and done, the yellow metal rose about $9.50 The only fundamental condition capping gold prices at the moment is a worry about the raising of interest rates by the U.S. Federal Reserve in December.

Higher interest rates make gold look comparatively expensive to hold, as far as opportunity costs go. In fact, however, bond yields on the U.S. w0-year benchmark were steady to slightly down.

Gold was up 0.75%. Silver also staged a nice rebound, rising about 1.00%.

West Texas Intermediate crude once again dipped below $50 per barrel, only to recover, telling us that it is testing levels north and south of $50 pb. The first thing that is on traders’ minds is the inability of OPEC to get all its members and affiliates on the same page regarding a production freeze, something that would presumably drive prices up. If expectations are truly dashed on that front, look for seriously lower prices in energy.

It’s not looking rosy. Output cuts aren’t “an option for us,” said Russia’s envoy at OPEC, Vladimir Voronkov, according to Interfax.

But something else more systemic is dragging on oil. There is still simply too much supply and not enough demand.

Trade group American Petroleum Institute issued its weekly report of crude stockpiles and other oil supply-demand data, ahead of an official report by the U.S. government's Energy Information Administration on Wednesday. Stockpiles grew by a larger-than-expected 4.8 million barrels.

Stocks responded to all the wishy-washy, neither here-nor-there earnings reports flowing out of Wall Street today by turning modestly lower.

There are also the matters of soft consumer activity and a stronger dollar, which keeps a lid on exports, pricing American goods higher than usual. Let that be a word to the wise among hawks on the FOMC. How much higher would they want the dollar to go?

Under Armour did spectacularly poorly on the trading floor, falling 10% even though it exceeded predictions on earnings. Caterpillar and 3M did well on earnings, but are showing signs of atrophy in their respective niches, which investors understandably shy away from. But they are old blue chippers and should recover.

Europe and Asia were mixed. Not much action anywhere. The Nikkei and FTSE did best out of the overseas markets. Note that their currencies have declined the most against the U.S. dollar, making their products more attractive here.

Wishing you as always, good trading,