Oil rose, Wall Street rose, the US services sector – the economy’s heart – is beating more strongly and gold again fell as investors moved closer to acceptance that a rate rise is very likely in December from the Fed.
For Australia, this means a modest 25 to 30 point rise at the start of ASX trading later this morning, which will be much improved on yesterday’s gloom and doom after gold suffered its biggest one day slide in almost three years.
That Bloomberg – inspired rumour of the European Central Bank looking to end its easing program also vanished as quickly as it emerged yesterday and the better than expected measure of service sector activity failed to be a negative for most markets.
Wall Street ended higher with the Dow up 0.8%, the S&P 500 up 0.4% and the Nasdaq up half a per cent.
Oil rose with November WTI crude up $US1.14, or 2.3%, to settle at $US49.83 in New York after a high of $US49.95. The settlement was the highest since June 29, according to FactSet data.
In London, Brent crude rose 2%, to end at $US51.86 a barrel —the highest finish since early June.
Comex gold futures rose early in the session in Asia and Europe, but turned down after the solid survey of service sector activity in the US was released which showed an 11 month high.
Prices had spent part of the session struggling to rebound from Tuesday’s 3.3% drop. They finally gave up trying and headed lower.
December gold fell $US1.10, or 0.1%, to close at $US,268.60 an ounce, down from an earlier high of $1,279.40. Prices ended around their lowest settlement since June 23—the date of the Brexit vote in Britain.
“The sharp rise in U.S. services sector activity has further boosted the prospects of a December rate hike, which has underpinned U.S. bond yields and undermined noninterest-bearing assets like gold and silver,” said Fawad Razaqzada, technical analyst at Forex.com, quoted on Marketwatch.com.
“In addition, the general improvement in risk appetite—stocks and crude oil have both rallied—has further dampened demand for the perceived safe-haven assets,” he said.
Among other metals, Comex December silver was again weak,losing 8 cents, or 0.5%, to $US17.695 an ounce, after dropping 5.8% a day earlier. December copper lost less than half a cent to $US2.165 per pound and proving to be quite resilient at these price levels.
So there should be a slightly less frightening start to trading for local gold stocks this morning than yesterday’s ugly kick off with big losses across the board.
As to be expected after its big plunge on Tuesday night, local gold stocks took a pounding yesterday in the wake of gold’s biggest one day slide for nearly 3 years.
The All Ordinaries Gold sub-index lost 6.4%, or around $3 billion in value, as the volatile sector suffered its worst day in five months as the ASX 200 fell 0.6% or 31 points.
Shares in Australia’s largest gold producer Newcrest closed down 5.1%. Evolution Mining, Northern Star Resources and St Barbara all lost more than 8%.
But gold and nickel group, Oceanagold Corp plunged close to 14% as it was hit by investor selling after the big gold slide and continued concerns about its nickel mining operations in the Philippines where they could face closure.
BHP Billiton and Rio Tinto closed down 0.2% and 1.1% respectively.
