Spot Gold plummets $25 to 3 month low at $1267
NEW YORK (Oct 11) Gold prices are sharply lower and dropped to a fresh three-month low in early U.S. trading Friday. Chart-based selling pressure, including sell stop orders being triggered as the U.S. futures market opened, is featured. Also, weak-handed longs who were under water were forced throw in their towels. December Comex gold was last down $30.10 at $1,266.50 an ounce. Spot gold was last quoted down $18.10 at $1268.75. December Comex silver last traded down $0.771 at $21.125 an ounce.
Asian and European stock markets rallied Friday, following the big gains in U.S. stock indexes Thursday. U.S. stock indexes are slightly higher Friday morning, but are holding those large gains scored Thursday. It’s a “risk-on” trader mentality in the market place to end the trading week, and that has pulled trader/investor monies away from the precious metals markets and into equities.
The U.S. Congress and President Obama appear close to agreeing on a measure to extend the government debt ceiling for six weeks, so the lawmakers can then work out a U.S. government budget deal in that timeframe. Or so that’s their logic. While there is still much disagreement between Republicans and Democrats on the government spending, the markets are encouraged and seeing significantly increased risk appetite due to the likelihood the U.S. government could be back open as soon as Monday. The dearth of U.S. economic data the past week has put a damper on many markets.
The keener risk appetite in the market place late this week is also partly due to bullish markets reaction to the news Wednesday that President Obama nominated Janet Yellen to succeed Ben Bernanke as chairman of the Federal Reserve. She is expected to be easily confirmed by the U.S. Congress. Yellen is perceived by the market place to be a monetary policy “dove.”
U.S. economic data due for release Friday includes the University of Michigan consumer sentiment survey. Most U.S. government economic data is not being released due to the U.S. government closure. The G-20 finance ministers and central bankers are meeting in Washington. There will be pronouncements coming out of that confab that will be monitored by the market place.
Traders and investors are looking ahead to next week, when a batch of fresh economic data from China, the world’s number-two economy, is released.
Separately, I’m seeing a pattern of news and economic data coming out of the European Union that is troubling. EU economic data released the past several weeks, or longer, has been lukewarm at best and worrisomely weak at worst. EU finance officials, the IMF and the European Central Bank have all given signals the past several weeks that suggest while their collective economies are teetering on recovery, they are also teetering on sliding into another major financial crisis. Greece’s unemployment rate reached 27% last month. The ECB is propping up the major European banks, which hold massive amounts of non-performing commercial loans. I suspect a new economic and financial crisis in the European Union would be set off by a lack of trader/investor confidence in European bond markets. I will keep an extra close eye on bond yields in Span and Italy in the coming weeks, and keep you informed. If those countries’ bond yields start rising it could be an early sign of trouble. It will be those periphery EU countries that have been in economic and financial trouble in the past that will likely lead any serious European Union financial trouble in the future. Such a scenario would likely be significantly bullish for U.S. and German bond markets, gold and the U.S. dollar.
