Gold down, and it was a case of vote, what vote in Italy? Crisis, what crisis after the country’s PM quit after his reform referendum was defeated by sceptical Italian voters.
The sell off in financial markets in the expected result happened, Italian banks are in the firing line over bad debts and a need for new capital, Italy is search for a new leader, the eurozone is under pressure and gold, that traditional rider of global volatility, slides to a 10 month low.
The euro sold off to just over $US1.05, before rebounding back above $US1.07.
European sharemarkets rose, except Italy which fell 0.2%, but it had been down 2.1% at one stage, hardly a rout. Naturally bank shares were weak because that is where the market’s focus is now.
Wall Street ended higher with the Dow at record levels and our market is looking at a 40 point rise on the ASX 200 at the opening after solid trading on the futures market overnight.
But Comex gold futures fell as much as 1.7% to $US1,157.26 an ounce overnight — the lowest level since February. They then rebounded to around $US1,077 an ounce before easing to settle at$US1,073 and looking weak. Gold is now up 10% for the year, instead of nearly 20% before the election.
It had been helped by the non-appearance of the mooted four increases in interests rates from the US Federal Reserve, the Brexit vote in the UK boosted interest in the metal, as did fears about the health of the Chinese economy and fears of a US recession.
And as the US presidential election approached, investors anticipated that uncertainty surrounding both the election and a possible win by Donald Trump and gold rose strongly, past $US1,300 an ounce.
But gold was hit by Donald Trump and expectations that his stimulus would help spur growth and force the Fed’s to lift rates next year after te expected increase next week.
And that triggered a sell off – gold has fallen nearly 9% since the November election.
Compounding the problem has been the strength of the US dollar (the usual enemy of a strong commodity prices). The greenback is up 2.6% since the US elections against a basket of major currencies.
The Aussie dollar edged higher overnight and was around 74.80 US cents in early Asian trading.
Oil rose, then eased to be above $US51 a barrel in New York, with traders starting to wonder how the cuts will actually play, Russian production in November was a 30 year high of 11.21 million barrels a day. Any cut in production will merely return Russian output to what it was a few months ago. Some cut.
