by Chris Becker
Let’s look at what is shaking up in macro markets around the world.
First of all, gold and silver jumped last night on the NYMEX open, the “undollar” finishing up nearly $9 per ounce to $1260:
Was this because of a jump in official Chinese CPI, which recorded a higher than expected 2.5% for May? Possibly – although PPI stayed negative at -1.4%, up a little from last month’s 2% fall.
Others note there is something more going on, particularly Chinese CFDs (commodity finance deals) just like in copper and iron ore:
In the gold markets, the paper or synthetic ‘demand/supply’ dominates pricing as opposed to the non-precious metals which have at least a grain of fundamental sense to them still
Throughout 2012/2013 – as the gold CFDs were booming, Chinese demand for physical gold was soaring as the price plunged (due to the forward hedging required in the CFD transactions which pressured gold swaps/futures lower and thus dominated pricing)
As CFD unwinds hit en masse, these flows must unwind (cover hedges and ensure the underlying physical is there… and if not buy it)
This will pressure gold futures prices higher and because unlike in non-precious commodities where spot markets wag the tail of the futures markets – spot gold will likely be dragged higher also (as we know the demand for the physical has been high).
British industrial production figures were very solid last night coming in at 3% for the year, and 4.4% for May but pound sterling (GBP) didnt like it and was sold off straight from the London open and into the NY close falling from 1.6807 to 1.6755:
Similarly the FTSE slumped at its open but recovered as the algos marched the same tune from the ‘States and finished up for the day near its resistance level alongside the DAX which was bid all session long, now at a new record high at 10024 points.
In the US, the extremely overbought S&P500 managed to eke out gains but it took until the close to get it moving, and it currently sits at just over 1951 points on the futures. I’ve pointed out before that a small correction in the coming days/weeks is a higher probability:
The other market I’m watching this morning is WTI crude, which had a large bearish engulfing candle on the 4 hourly charts and looks prime for a short swing as it comes up against medium term resistance:
What’s coming up today? Locally this morning Westpac releases its consumer confidence figures for June, let’s see if more weather blues are on the way – but tonight the pound could be under more pressure with the official unemployment rate release.