Posted on August 12, 2015
Gold Spot Price Open: $1,111
Gold Spot Price Close: $1,126
Change in Gold Spot Price: +$15
Silver Spot Price Open: $15.35
Silver Spot Price Close: $15.58
Change in Silver Spot Price: +$0.23
Precious metals added decent value on Wednesday thanks to growing worries over China’s move to devalue its own currency. When all was said and done, gold managed to gain about 15 dollars while silver added in upwards of 25 cents. Platinum and palladium both also finished the day solidly upward, having gained more than 20 and 10 dollars respectively.
Yesterday, the only news story really making rounds tied to China’s move to devalue their own currency, the Yuan, by roughly 2%. The currency is now sitting near multi-year lows and the global marketplace has taken notice. The Dollar, which tends to act similarly to the Yuan, has been down the past two days and is currently hovering near a 1-month low. The reason behind the greenback’s move downward is due to the fact that some investors and market experts think China’s most recent policy move will make it difficult for the Fed to pull the trigger on interest rate hikes in September.
Basically, investors do not know how to perceive China’s shift in policy, and are nervous about what it might mean for the global economy a few months down the road. Being that interest rate hikes are thought to be something that will drive investments funds towards the US, doubts with regard to the September rate hike are causing the greenback to suffer. As a result of all this recent turmoil, precious metals have partaken in a bit of a rally. Now trading well above $15/ounce, silver has bounced back nicely while gold managed to move above $1,100/ounce and maintain that position.
According to Mark Chandler, chief currency strategist at NY-based Brown Brother’s Harriman, “China is still a big unknown, and the market is pricing in the worst. Many people in the market think that there’s less chance of a September hike, and that’s one of the factors that has helped lift the euro.” Going forward through the next few weeks, it will be interesting to see how the outlook on interest rate hikes evolves from where it is at presently.
After devaluing the Yuan by close to 2% on Tuesday, the People’s Bank of China devalued the Yuan by another 1.6% on Wednesday. Like that which took place a day ago, today’s move took the markets by surprise. As a result, US stocks took another beating.
While the devaluation of the Yuan may be confusing to some, the impetus behind the move is to make exports cheaper and thus more attractive to foreign buyers. While this may be a strategic move, it will be interesting to see how China combats the fact that a weaker currency will make imports more expensive and thus may have a negative impact on retail sales and pieces of data along those lines. For now, however, the market is still actively trying to decipher what recent moves by China mean for interest rates in the US and their potential hiking.
Today was the second day in a row where news stories were more or less dominated by China. Investors are now having to deal with the most recent currency devaluation and are trying to make sense of it. Looking ahead to tomorrow, it will be interesting to see what the weekly jobless claims report from the United States has to say. Being that employment data is quite vital to knowing when interest rates will be hiked, you can expect that this is something investors will be paying close attention to.