Spot Gold Up on Weaker Dollar; Oil Continues Plunge; Equities Stabilize

In spite of pressure from uncertainty in the U.S. elections coming up on Tuesday and plummeting crude oil prices, all three major stock indexes saw only small losses today.

Gold was up $2.40 per ounce, all of it coming on a sagging dollar.

The modest turnaround was fueled by a growing sense that the stock markets were oversold and the proverbial calm that precedes a storm has descended as we wait for Tuesday. The biggest story, however, was found in the price of oil.

West Texas Intermediate touched its lowest level since January, trading at the $44 per barrel mark. WTI was down at settlement about 1.30% after testing the $44.75 in a bid to change momentum direction. The U.S. crude benchmark is down 10% on the week. Brent North Sea crude fared even worse, falling about 2.00%.

This week Saudi Arabia issued a half-threat-half-advisory that was aimed at Iran. The statement implied that if production is not brought, prices will inevitably fall. Since most other OPEC countries fell into line behind the Saudis with Iran one of three resisters, common sense says that, whatever the motive, the Saudi Arabian statement is true. The world is drowning in oil and there is more and more becoming available literally on a daily basis.

A bigger worry is that the Saudis and Iranians are playing out their geopolitical ambitions on yet another stage and that conflict is imminent in that part of the world. Pick a conflict and you will find that Iran and Saudi Arabia are on different sides.

The dollar sent mixed messages today. It was up against the yen slightly, one major haven currency, but down against the Swiss franc, the other major haven. The green back lost modestly against the euro, on general trading sentiments. It was also down against the British pound on the new Brexit developments that demand Parliament vote on the issue. Parliament would also vote on the how and when of the exit from the European unit, should it approve it in the first place.

Today’s jobs data was pretty much middle-of-the-road with a B to B+ rise in jobs created (along the lines of about 2 million on an annualized basis), and a drop in the unemployment rate. More importantly, the hourly wage level rose 10 cents or about 2.80% on an annualized basis – very healthy, should it continue.

Once we clear the election from our investing dockets, we will immediately turn to the next Fed meeting in mid-December. And speaking of mid-December, in a few short weeks, we will enter the holiday vortex.

Just to button up a week in which volatility generally increased, the VIX fell about 3.50% today. As the movie said: “I ain’t afraid of no ghosts.”

Wishing you as always, good trading,