Friday, November 14, 2014

Markets End Mixed While Metals Wander Aimlessly

QUICK READ: The markets were mostly a mixed bag this week, with stocks and precious metals bouncing up and down before ending largely unchanged. The dollar eased back from recent highs but remained robust, keeping commodity prices lower. Despite encouraging signs, it’s still too soon to call it a recovery in the U.S., especially as Eurozone deflation, more modest Chinese growth, and sinking oil prices raise concerns about a global economic slowdown heading into 2015.

After plowing through new record highs multiple times last week, the U.S. stock indices continued their seemingly inexorable climb on Monday and Tuesday before the winning streak was finally snapped. Both the Dow Jones and S&P 500 notched fresh record closing averages on Monday, and the S&P continued to edge higher on Tuesday. This marked the fifth consecutive record high close for the index, a feat it last matched in May 2013. Wednesday finally saw the winning streak snapped, as the Dow and S&P ended just marginally below unchanged. The Nasdaq however, was buoyed into the green by Apple stock hitting an all­-time high. Thursday was another struggle for the indices to break into positive territory despite a favorable earnings report for Wal-­Mart, which saw its stock jump over 4% after beating analysts’ expectations. The news that five of the world’s biggest banks had reached a settlement over allegedly rigging trades in both the Forex and precious metals markets had investors wary, and was largely blamed for the subsequent hesitance in equities. Gold had its best trading day in 14 months on Friday, rising $45 from the opening of markets in the East to the close in New York. The yellow metal gave much of these gains back on Monday, however.

Using technical analyses, the 61.8% Fibonacci retracement line shows that gold currently has support at $1,138.10, while the 50% Fibonacci retracement indicates a resistance level at $1,186.70. Silver has been trading sideways since plunging below $16/oz, while the Platinum Group metals have slid on waning global demand. This has been especially true with the economic sanctions against Russia, the world’s leading palladium producer. Although the dollar is finally easing a bit, it has remained robust, especially against other currencies around the globe. This strength in the greenback has helped keep precious metals prices lower, while also encouraging Russia and China to deal in yuan in an attempt to undermine the dollar. It is currently trading at a 14­month high against the pound sterling, and has been absolutely dominating other world currencies since the beginning of the third quarter.

The strength of the dollar, as well as oversupplies of energy and agricultural products, is causing a drop in commodities prices. The crude oil benchmarks bounced from four­-year lows on Friday, but are expected to continue to fall. The U.S. government adjusted its forecast for average gasoline prices for 2015, revising projections to $2.94 per gallon, down 44 cents from just last month’s predictions. Despite sharp gains in early trading on Friday, Brent crude remains below $80 per barrel while West Texas Intermediate is struggling to stay above $75/bbl. Lower oil prices are also dragging down energy stocks, contributing to the S&P 500 remaining flat.

In the Asian markets, Japan’s Nikkei 225 continues to ride high, approaching 17,500 after opening in the green on Friday. Hong Kong’s Hang Seng index crossed the 24,000 mark as the exchange is benefiting from establishing crossover trading with China’s Shanghai exchange.


The G20 Leaders Summit in Brisbane, Australia this Saturday and Sunday should cause some stir on the markets one way or the other. A slew of important benchmarks for gauging the direction of American economy are on the docket next week, including October’s Producer Price Index, Consumer Price Index, and the minutes from the FOMC meeting.

By Everett Millman, head content writer at Gainesville Coins, a leading gold and silver distributor.