Gold Edges Higher on Perceived Weakness
U.S. 10-year Treasury bonds were slightly higher today, after an ISM
manufacturing report came in weaker than expected. The report highlighted that
the U.S. is growing slower than it should be, and refocused trader attention on
pervasive negative U.S. sentiment. Bonds have shot higher through the summer, on
widespread speculation that housing troubles will lead to an overall slowdown in
the U.S. economy.
The dollar rose versus the euro and the yen, and the yen sank across the
board as traders resumed the carry trade on equity strength. As U.S. and global
equity markets continue to make up losses from late summer, the yen surged
versus the euro, which then helped to boost the dollar as well. The dollar has
been hit with major weakness over the past month, on a Fed cut and overall
negative U.S. sentiment. The carry trade has been a major factor as well for yen
movement, as traders borrow and cover yen positions based on perceived equity
strength.
Crude oil futures fell about 2% a barrel today on perceived demand weakness.
Traders also bet against oil today on dollar weakness, as the U.S. will be able
to get less with the same amount of currency, as the dollar continues to fall.
Crude fell over 10% during the summer before rallying to new record highs in the
past week. Natural gas futures rose over 2% today as traders forecast winter
demands.
Gold futures rose 0.5% today, despite a rising dollar and falling oil prices.
Traders bought gold today on speculation of more losses for the dollar, and a
resumption of the crude rally. Gold normally trades inversely to the dollar and
with oil, but neither seemed to control today’s gold trading. Instead, gold
rallied on perceived dollar weakness and rising oil prices, despite today’s
action. Copper futures rose about 1.5%.
Grains were mixed. Soybeans were up fractionally, while corn fell about 1%.
Stocks rallied strongly on Monday, with the Dow Jones Industrial Average
closing at a record high. The rise came despite the emergence of more negative
news related to the credit and housing market. Click
here to read the rest of today’s
Stock Market Recap.
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