Gold reached its highest level in a week on Tuesday. Spot gold climbed 1.5 percent to $1,213.02 an ounce while futures gained 1.6 percent to $1,215.10. Investors bought bullion after the dollar was hit by U.S. President Donald Trump's comments on currency devaluation by other countries.
”Clearly Trump remains the main driver for gold. He has really turned from being a bit of a foe of gold to a friend with the uncertainty of his policies,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. A weaker dollar supported bullion, though traders were also eyeing a two-day Federal Reserve meeting starting later in the day, hoping for clues on the outlook for U.S. interest rates. Higher rates could strengthen the U.S. currency, making dollar-denominated gold more expensive for holders of other currencies, potentially dampening demand.
According to theCommerzbank, gold was also finding support from expectations of higher euro zone inflation.
Spot silver rose 2.47 percent to $17.53 an ounce after hitting the highest since Nov. 11 at $17.61. Silver has outperformed gold this month, mainly helped by gains in base metals, which have prompted funds to take long positions since silver also has industrial properties, Saxo Bank's Hansen said.
U.S. equities droped on Monday as a new measure taken by the Trump administration on immigration gave investors pause. The Dow Jones industrial average fell around 185 points after sliding more than 200 points, dropping below 20,000, withGoldman Sachsand 3M contributing the most losses. The S&P 500 dropped 0.97 percent, with energy shedding 2.1 percent.
“Global risk sentiment appears to have been jolted somewhat by the weekend focus on President Trump’s moves on immigration,” according to Scotiabank strategists led by Shaun Osborne in Toronto.
Over the weekend,U.S. President Donald Trump signed an executive orderbanning citizens of Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen from entering the U.S. The order seeks "extreme vetting" procedures for those it did allow to enter the U.S. In signing the order, Trump said he pledged to "keep radical Islamic terrorists out of the USA" .
Financial markets are responding positively to Trump’s presidency. However, investors remain wary about the impact of U.S trade policies on the dollar and what Washington’s approach to dollar policy will be.
The global equities rally continues to gather speed as investors embrace riskier assets after the Dow Jones Industrial Average reached 20,000 for the first time yesterday. Japan’s Nikkei Stock Average closed up +1.8%. The rally pushed the price above a downtrend line from December highs and could open the doors to more gains and signal the potential end of the bearish correction. Since the beginning of the year, the pair has been moving in a downtrend zone, that is being broken.
The Dow Jones Industrial Average hit the psychologically significant threshold of 20,000 in intraday trade. The gains for the Dow on Wednesday came after Trump signed executive orders on Tuesday to move forward with the construction of controversial infrastructure projects.
The equity rally is supported by expectations that Trump will unleash a raft of pro-business policies, including tax cuts, a rollback of regulations and fiscal spending.
If the Dow does finish at 20,000 it would mark the second-fastest 1,000-point move in history (42 days), since the 59-session span between late March and early July 2007 .
The USD/JPY currency pair has started the week with slight losses. The pair is currently trading at 113.10. Japanese All Industries Activity edged up to 0.3%, instead of the 0.4% forecast. The Flash Manufacturing PMI index improved to 52.3 points.
The downside risk for the USD remains elevated more so from Trump's inauguration if he fails to underscore economic policy. However, if Donald Trump comes out firing on all fiscal stimulus cylinders, bond yield will surge, and the greenback would catch an enormous updraft. The U.S. dollar remains under pressure across the board since Trump's inauguration speech on Friday still did not provide investors with clarity on his tax reform and fiscal spending plans.
Crude inventories rose 2.3 million barrels in the week to Jan. 13. However, the expectations were for an increase of 342,000 barrels.
Chinese data showed upbeat Q4 GDP, which also added to the upside oil. Reports of record Chinese demand, evidenced by Crude throughput hitting the highest level in history for the year at 10.79 million bpd, strengthened the ongoing bullish momentum.
In an interview with Sputnik, the OPEC Secretary-General Mohammed Barkindo noted that the OPEC deal will bring stability to global oil markets.
He said that “there is a great opportunity for all the stakeholders, including the oil and gas industry, to solidify this platform and insure that it continues to perform the stabilization role in the best interests of the industry as well as the global economy".
The Bank of Canada (BOC) announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.BOC projects that Canada's real GDP will grow by 2.1 per cent in both 2017 and 2018. This implies a return to full capacity around mid-2018, in line with October's projection.Inflation in Canada has been lower than anticipated since October, mainly because of declines in food prices. Measures of core inflation are below 2 per cent, reflecting material excess capacity in the economy.
Bank of Canada governor Stephen S. Poloz says a rate cut remains on the table if downside risks materialize. He highlighted unknowns around U.S. President-elect Donald Trump’s policies in a rate decision and indicated he’s prepared to cut interest rates if new protectionist measures derail the nation’s economy. The central bank kept its key interest rate unchanged at 0.5 percent and said “significant uncertainties” from the U.S. are weighing on the economic outlook. In contrast to the United States, Canada’s economy continues to operate with material excess capacity. While employment growth has remained firm, indicators still point to significant slack in the labour market. The resource sector’s adjustment to past commodity price declines appears to be largely complete, but negative wealth and income effects will persist.
The British pound surged after Theresa May’s speech, in which she set out for the first time that her government is determined to make a clean break from the EU. Prime Minister Theresa May said she would give Parliament a vote on the final Brexit deal.
Theresa May offered her most explicit vision of Britain’s future relationship with its European Union neighbors. May pledged to quit the single market and instead seek a customs agreement with the bloc to deliver “a smooth and orderly Brexit.” Theresa May confirmed that the Brexit deal will be subject to parliamentary approval, sparking a rally in the pound. British pound has built on gains seen after hotter than expected UK inflation data earlier. Cable is presently up by 2.6% at six day highs above 1.2340, putting in some distance from yesterday’s three-month lows that were seen just less than 1.2000.
The U.S. Dollar turned lower because the lack of details of the President-Elects administration's plans for economic stimulus.
The Dollar Index received a beating on Wednesday evening with prices turning bearish during trading on Thursday. A decisive breakdown and daily close below 101.00 could open a path lower towards 100.00.
Donald Trump's news conference failed to provide the clarity on future fiscal policies. The news conference covered topics about the Russian hacking reports, Trump's separation of his business empire and repeated criticism of the media. Trump uncertainty keeps investors on edge.
The USD/JPY currency pair dropped at 115.72, its lowest since December 14th, after the market rushed to sell the greenback following the release of FOMC Minutes. The new leitmotif of the US Central Bank is showing that uncertainty.
US data came mixed in the hints for the Non-Farm Payrolls. ADP had a significant slowdown in job gains in December: 153K against 215K in November in the private sector. Another worry came from the ISM Non-Manufacturing PMI. The services sector is the largest in the US, and the top figure was a beat. The employment component fell by 4.4 points , a worrying sign for the Non-Farm Payrolls.