Dollar Weakens, While Gold Moves Higher

[Excerpted from Bill Cara's Daily Report]

There was a notable absence of volume on the US pre-Memorial Day holiday Friday. After trading modestly higher for most of the session, there was a closing 45-minute pull-back in the Financials (XLF -0.7%) that left prices a bit lower on the day. The US Dollar continued its weakening, while Gold moved to higher highs, and Oil also closed stronger.

At the close, for the fifth day in six, the DJIA (8,277.32 -14.81 -0.18%), S&P 500 (887.00 -1.33 -0.15%) and NASDAQ Composite (1,692.01 -3.24 -0.19%) all were down. But, really, the session was much ado about nothing except the US Dollar, Precious Metals and US Bonds.

Headed in the opposite direction, the Toronto Composite (9,993.42 +43.83 +0.44%) and Toronto Venture Board (1,096.51 +6.66 +0.61%) closed higher for the third time in four for the Toronto index in this post-holiday week in Canada, and the fourth in four for the Venture Board.

In NY, the Financial sector (XLF -0.7%) was led down by REITs ($DJR -2.2%) and Banks ($BKX -1.9%). Airlines ($XAL -2.2%) were down as well with the higher Oil price ($WTIC +$0.62/bbl +1.0% to 61.67). The Consumer Discretionary sector (XLY +1.1%) was moved higher because of a push in Sears Holdings (SHLD +10.4%) that “surprised” traders with a higher than expected profit albeit on much lower same-store revenues.

The Cara 100 company stocks that lifted the most were once again international and volatile ones: Russia’s Mobile TeleSystems (MBT +10.0%) and Vimpel-Communications (VIP +6.2%) and Canada’s Teck Corp (TCK +6.5%).

Earlier in the day on Friday, prices were, except for India, lower across the markets in Asia Pacific. Japan’s Nikkei 225 (9,225.8 -0.41%), Aussie All Ordinaries (3,755.4 -1.30%), Hong Kong Hang Seng (17,062.5 -0.80%), and Shanghai Composite (2,597.6 -0.50%) all took losses, but less than in the previous session. India’s BSE 30 (13,887.2 +1.10%) lifted.

Later Friday in the European equity bourses, the French CAC (3,228.0 May 22 +0.33%), German DAX (4,918.8 May 22 +0.37%) and UK FTSE 100 (4,365.3 May 22 +0.46%) closed higher, as it was after their closes that the US market sold off at the end of that session. But they too lost steam during the day as traders seem to be looking for positive news and not finding anything much of substance.

The US long Bond ($USB 119.31 -1.02 -0.84%) closed down again after a single rally day following three days of losses, but at least the bonds were stronger as the Friday session wore on. At the close, the yields were as follows for 30-year (4.392 +0.79 +1.83%), 10-year (3.448 +0.95 +2.83%), and 5-year (2.204 +0.66 +3.09%). Treasury bill yields closed flat at 0.175.

Bonds have sunk in price this week as traders pondered the possible lowering of credit ratings of sovereign debt of the US and UK.

The story of the day and the week, however, is the rapid decline of the US Dollar ($USD 80.03 -0.52 -0.64%), closing lower for the fifth straight day, easily breaking support at 81. The Yen (105.50 -0.47 -0.44%) slid during the day from a gain to a loss against the $USD, while the Euro (139.94 +0.92 +0.66%), Pound (159.19 +0.67 +0.42%), and Cdn Loonie (89.17 +1.08 +1.23%) were all much stronger against the USD. The Loonie has moved very strongly against the USD this week, which it usually does as precious metals and oil contracts lift in price.

Euro futures closed firmly (1.4013 +0.0125 +0.89%).

Crude Oil ($WTIC 61.67 +0.62 +1.02%) strengthened against a very weak $USD. So too did $GOLD futures, which lifted $49.10/oz over the past four days (957.40 +3.90 +0.41%). The Friday high was $961.40.

Spot (cash) market prices closed as follows: Gold (957.05 +5.50 +0.58%), Palladium (232.0 +1.0 +0.43%), Platinum (1154.0 +3.0 +0.26%), and Silver (14.65 +0.18 +1.24%), which except for palladium were solid moves over the course of the week.

Stock futures for the DJIA (8260 -35 -0.42%) were weak at the close.

Comments

[fireball:]

it seems natural for real assets to be on the rise. not as sure about oil as the unwinding continues. the currency metals seem a pretty sure thing. i imagine the north korea test will give metals a boost on monday. the wholesale dollar creation and accelerating debt were already enough.

May 25 09:58 AM