2017 Starts off with a Bang
Here we are, at the first day of trading in 2017 and it is beginning with a bang. As of 3 o’clock EST, we have US equities, the US dollar and the precious metals markets all trading higher.
Dow restarts climb to 20,000 & US Dollar Surges to Higher Ground
The Dow Jones industrial average is trading up 44 points (.23%) at 19807. After a few days of lower pricing, it seems as though the Dow is back on its path to 20,000. After trading lower over the last three trading sessions of 2016, US equities have begun 2017 with the bullish demeanor that was so prevalent in the last quarter of 2016.
The US dollar is up substantially in trading today, trading up a full percentage point at 103.23. This takes the dollar to highs not seen since December 2002.
Precious Metal Complex On-Fire
Both gold and silver are trading briskly higher, with gold futures up $8.30 1160, up ¾ % on the day. Silver is also trading higher, up over 2 % at 16.35
The real stars of the precious metals complex today are Platinum and Palladium, with both the precious metals trading higher on the day. Platinum has gained roughly $37 on the day, a gain of over 4 ½%, while Palladium is gained roughly $32 a 5% gain.
These prices of course reflect a much stronger US dollar, which the entire precious metals complex has had to overcome in today’s trading.
The fact of the matter is that it is a rare occurrence for all three of these markets (precious metals, equities, US dollar) to run in tandem, all trading to higher pricing. Traditionally there is a negative correlation in both equities and precious metals, as well the US dollar and precious metals.
Obviously since precious metals are paired or traded in US dollars, a strong US dollar will have a negative effect on precious metals pricing. So, on days like today where both the metals and the US dollar are trading higher, it is the precious metals complex that has to overcome dollar strength before it can show a positive gain on the day.
Equities are considered a risk-on asset class, whereas the precious metals are considered a safe haven asset, as such typically capital flows to either one of these asset groups at the expense of the other.
One explanation for this rare occurrence is potential upcoming Chinese demand for gold as their New Year begins at the end of January.
According to, Sam Laughlin, precious-metals trader with MKS (Switzerland) “Chinese New Year demand is expected to support the metal over the short term, with key support sitting toward $1,142, while consolidation above $1,160 will be required for a run higher.”
Another explanation might lie in the fact that recent US dollar strength adds to the uncertainty as to the Federal Reserve’s planned rate hikes this year.
In either case the first day of trading in 2017 has begun with a bang, whether or not the unique correlations found within different markets today will continue is the real question.
Wishing you as always, good trading,