U.S. Equities Soar and Gold Prices Plunge

In what can best be described as a relief rally in U.S. equities, recent events have shifted investor sentiment strongly towards a risk-on environment today. Deep concerns about Irma subsided as the hurricane did less damage than originally forecast. Investors were also relieved that North Korea did not launch another missile during its national holiday, Founder’s Day.

In an article for MarketWatch, Wouter Sturkenboom, senior investment strategist at Russell Investments, said, “It’s basically a relief rally as there has been less damage from Hurricane Irma than expected and no rocket launches from North Korea. It is hard to understand why the simple lack of bad news is sending prices higher, but we must respect that fact —the momentum is still strong.”

This reprieve in investor angst resulted in a new record close for the Dow Jones Industrial Average which rose by 250 points today. With one half hour left in the trading day, the Dow is currently at 22,046.29, a 1.15% gain. The Standard & Poor’s 500 gained over 26 points to close at a new record high of 2487.78, and the NASDAQ composite also gained 1.15%, closing at 6432.

A strong U.S. dollar and the risk-on environment can be cited as underlying factors which took the precious metals markets dramatically lower today. Gold futures are currently trading at 1331.50, a loss of $19.70 (-1.46%) on the day. Silver futures also traded under tremendous pressure, losing $0.30 (-1.67%) and settling at $17.82.

Spot gold also traded dramatically lower, losing $19.50 on the day to settle at $1328.50. Today’s dramatic decline is a combination of both a stronger U.S. dollar as well as traders selling the precious yellow metal. According to the Kitco Gold Index (KGX), today’s decline of $19.50 was composed of $-9.30 due to a strengthening U.S. dollar, and the remaining $-10.20 directly attributable to selling in the market.

We are certainly thankful that damage from Hurricane Irma was not as significant as originally forecast, and North Korea did not use its holiday as an excuse for another missile test. However, as far as the current crisis with North Korea, do not assume that this conflict will go away by itself.

Given that there were no missile tests this weekend, the North Korean government has once again begun to ratchet up threats made to the United States. This comes as the Security Council begins to vote today on a resolution drafted in the United States. This resolution would impose new restrictions on the North Korean government in response to last week’s underground nuclear test.

According to CNN, “North Korea has warned the United States that it will pay a "due price" if harsh sanctions against the country are agreed at a United Nations Security Council meeting on Monday.

North Korea's Foreign Ministry said in a statement published on state media that if the U.S. "does rig up the illegal and unlawful 'resolution" it would respond in kind.”

Wishing you as always, good trading,