Gold prices ended another quiet trading session firmer Tuesday, on some bargain hunting and short covering following recent losses.
The market place could remain subdued the rest of this week, ahead of the unofficial end of summer that comes with the approaching U.S. Labor Day holiday weekend. December Comex gold was last up $6.10 at $1,285.00 an ounce. Spot gold was last quoted up $8.10 at $1,284.75. December Comex silver last traded up $0.009 at $19.44 an ounce.
One underlying theme this week is the rallying U.S. dollar index and slumping Euro currency. The U.S. dollar index is at an 11-month high, while the Euro is at an 11-month low. Comments from European Central Bank president Mario Draghi late last week in Jackson Hole, Wyoming, are concerning to many market watchers. Draghi strongly hinted the ECB is set to implement more monetary stimulus measures to prop up the flagging European Union economy—and to ward off the threat of deflation in the bloc.
The state of the EU’s economy is prompting some increased demand for safe-haven assets. German bonds are hovering near record-low yields, while U.S. Treasury yields have also dropped significantly recently. Safe-haven gold is also seeing a good bounce Tuesday morning. With this increasingly interconnected world, it’s hard to imagine other major world economies being healthy when the European Union’s is so sickly. This notion is an underlying bullish factor for gold.
The other theme in the market place is new record highs, or multi-year highs, in the major U.S. stock indexes this week. It’s been a “perfect storm” for the U.S. stock market recently: U.S. economic growth that’s not too hot and not too cold; an economy that’s still awash in cash from years of easy money policy from the Federal Reserve; and very low inflation that makes returns from the stock market look better than other asset classes. However, there are a few early clues this perfect storm for the equities market is ending. One is the U.S. Fed has hinted just recently it will move sooner rather than later to raise interest rates if the U.S. economy continues to show improvement.