Gold Sidetracked by Seeming Deutsche Bank Resolution

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With the growing realization that Deutsche Bank’s problems may be more than temporal but less than fatal, the U.S.-listed stocks of the megabank rocketed up 14.5% today. Needless to say, that pulled equities up along with it. The three major New York indexes were up between 0.80% and 0.90% each.

Also needless to say, for the moment the Deutsche rebound erased the need for safe-haven investments.

Gold prices fell about $2.50, primarily on regular trading. There was a very small push up from a barely weaker dollar.

The yen, which functions as one of the main safe-haven currencies, slipped about one-third of a percentage point against the U.S. dollar. The dollar was also up against the Swiss franc.

Higher bond yields and lower face prices show that traders were looking to trade paper on more favorable terms. The U.S. benchmark 10-year yield peeked up over the 1.60% rim.

We have all been following crude with a lot of interest this week as OPEC yanks the chain once more on production freeze/cutbacks for members and beyond to other, non-OPEC major producers. (Like Russia.)

West Texas Intermediate is up about 0.25% on the day, a nice gain but much smaller than those picked up earlier in the week. The topical reason prices were held down today is that there has been some profit-taking but the dips are luring fresh money into the trading action.

There is something that we should look at closely in oil, however. If you could read my mind, love, says the old Gordon Lightfoot ballad.

Apparently, someone in the U.S. oil business has been reading the mind of OPEC’s strategists perfectly. The rig count in the U.S. has gone up thirteen out of the last fourteen weeks. Moreover, this week the count went up by seven.

This tells us that the big producers here are anticipating higher world prices relatively soon. One has to consider that “adding a rig,” is not like opening up a fire hydrant. The rig takes some time and updating maintenance before it can actually give its owners oil. The time from the day a green light is given to real production varies depending on the type and condition of the individual rig.

Last year at this time there were 615 rigs in operation. Now there are 425 and that is up off the great bottom we experienced beginning in late 2015 to early 2016.

U.S. producers are eyeing OPEC production levels closely and preparing to jump in should there be a true curtailment of bpd levels. 

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer