The Dollar is Steering Precious Metals through Financial Markets
The U.S. dollar is leading movements within financial markets, where we see that stock markets have taken an opposite direction to the dollar due to the dollar selling to gain investments; therefore, global currencies are moving in a relatively high rate against the dollar. However, the dollar wasn't just only leading movement within stock markets and global currencies, but it also stretched to affecting the dollar's exchange rate within commodity markets like precious metal markets.
However, throughout yesterday's trading session; precious metals looked like they were being led by the dollar and continues till this moment as well. We see that the first regulator in precious metal prices is the dollar. Meanwhile, the dollar fell to its lowest levels yesterday in 15 months, thus taking precious metals into a volatile bullish wave and causing gold to record its highest at $1144.30 per ounce.
Gold managed to close with 1.90% rise, where it closed at $1139.80 per ounce; whereas platinum closed at 1449.00 rising by 4.17% adding $58 throughout the session; meanwhile silver spiked by 5.63% to gain almost one dollar and closed at $18.40 per ounce.
The dollar's drop in yesterday's trading session played a major role in pushing traders towards precious metals; meanwhile, as expected, silver gained the most liquidity from speculators, recording a major rise yesterday; as silver's gains were the most seen since September 17, 2008.
Today, the dollar rebounded to the upside against a basket of major foreign currencies; the dollar index rose from yesterday's low of 74.64 to trade above 74.85 points. The dollar's rise against a basket of foreign currencies, caused precious metals to fall throughout today's trading.
Gold today is trading at $1135.50 per ounce at 02:34 EST; dropping by 0.38%; silver, on the other hand, is currently trading at $18.22 per ounce falling by 0.98%; while platinum lost 0.97% to trade at $1435.00 per ounce. The drop precious metals have witnessed today was parallel to the rise seen yesterday in value; consequently, insuring that speculators have head towards silver and platinum, where turnout on it was caused by some speculations, alongside continuing demand on it, where improvement overshadowed the global economy.
Meanwhile, U.S. retail sales data released yesterday seemed positive, showing that the sector has indeed achieved growth by 1.2% two months in a row, therefore, pointing out that consumers in the world's largest economy has in fact started to stabilize their expanses; on the other hand, New York's industrial index data showed clear growth, which increase platinum's appeal and supported demanded.
Mr. Bernanke mentioned yesterday that he does support the dollar's stability at a time where the constant drop in the dollar could be problematic for the U.S. and the global economy as a whole. However, there are numerous doubtful sides in these statements, since there aren't any real steps being taken to combat the dollar's persistent fall, but it seems that the U.S. is in fact enjoying it! That notion by itself is pushing investors towards precious metals and towards gold as a safe haven against the dollar's drop, which could drag along with it higher prices, alongside instability in the dollar's purchasing power.
We await numerous economic data due to be released from major economies around the world; today's data are related to inflation directly from consumer price indices, such as the UK. Also, it could in form of producer price data, which will reflect later on in consumer basket prices. Gold, as we know, highly correlates with inflation but it seems that it is not responding to the inflation's drop in within negative levels, which could be a sign that inflation could be rising over the medium term. Despite of today's data, the U.S. dollar is in fact the one in control of precious metals sailing through financial markets, and showing investors that it is finding it hard to achieve some profits!