After a roaring end to 2016, the greenback continues to struggle in the new year, with the dollar index off another 0.6% this morning. Not helping is a weekend interview with the WSJ in which the president-elect called the dollar "too strong."
Strongest vs. the dollar today is the U.K. pound even as Prime Minister Theresa May calls for a clean break with the EU.
The dollar's decline is boosting the bid for the roughed-up precious metals, with both gold and silver higher by 1.25% for the session. At $1,211 per ounce, gold is at its strongest level since late November.
When it comes to ETF winners and losers, the U.S. and Russia scored while Mexico, Ireland and Italy had a harder time -- and the blue-chip Dow may have been the year's biggest standout.
The DJIA SPDR (NYSEARCA:DIA) gained 13.5% for the year, outpacing the S&P 500 SPDR (SPY, which gained 9.6%). Meanwhile iShares' Russell 2000 ETF (NYSEARCA:IWM) gained 19.8% for 2016.
Energy, financials and industrials were winners among sectors (Energy SPDR XLE up 24.9% on the year; Financial SPDR XLF up 20.2%; Industrial SDR XLI up 17.4%), while the healthcare SPDR XLV slipped 4.3%.
Among single-country funds, Peru (NYSEARCA:EPU), Brazil (NYSEARCA:EWZ) and Russia (NYSEARCA:ERUS) logged strong gains (62.5%, 61.2% and 50.6% respectively) while Italy (NYSEARCA:EWW) and Mexico (NYSEARCA:EWI) posted heavy declines (-11.9% and -11.8% respectively).
Fixed-income ETFs stayed relatively flat all year, but gold (GLD, up 8% for year) and silver (SLV, up 14.6%) performed among commodities.
Gold futures inched above yesterday's 10-month low but still fell for the sixth straight week, sinking after the Fed announced its first rate hike of the year with expectations for three more increases in 2017.
"The selling may not yet be exhausted... The bearish factors for gold, namely a high U.S. dollar, rising yields and equities and risk-on investor demand appetite leave bullion clearly on the defensive," HSBC analyst James Steel says.
Gold stocks are not yet in oversold territory but any bumps in enthusiasm about the incoming Trump administration could provide buying opportunities, J.P. Morgan's John Bridges says, while also warning that miners with higher debt loads look vulnerable in the absence of a stronger recovery in prices.
Bridges says Barrick Gold (NYSE:ABX) and Kinross Gold (NYSE:KGC) likely will continue to fluctuate most due to their enhanced sensitivity to gold prices while less levered names like Newmont (NYSE:NEM) and Agnico Eagle (NYSE:AEM) should be more stable, Goldcorp (NYSE:GG) remains in show-me mode as it works under new CEO Dave Garofalo to meet its new targets, and Eldorado Gold (NYSE:EGO) and B2Gold (NYSEMKT:BTG) rank among the few “growth” names left in the sector.
Eight months after Deutsche Bank (NYSE:DB) settled a lawsuit claiming it manipulated prices of precious metals, plaintiffs say documents it disclosed as part of the accord provide "smoking gun” proof that UBS, HSBC, Bank of Nova Scotia (NYSE:BNS) and other firms rigged the silver market.
Separately, an audit commissioned by German regulators suggest that Deutsche Bank employees may have manipulated internal indexes as part of a scheme to help Monte dei Paschi conceal losses.
Speaking at a conference at the Central Bank of Chile, Fed Vice Chairman Stanley Fischer gives no indication the U.S. central bank has any intention of not raising interest rates next month. "The case for removing accommodation gradually is quite strong."
The remarks should be of absolutely no surprise, but they make for a convenient excuse for a whoosh lower in gold in the last few minutes. The metal is now down 2.6% on the session to $1,233 per ounce, a price not seen since the first days of June. Next stop on the charts is $1,200.
Silver is off 4.15% to $17.96, still well above its early June low of about $16.
The 10-year Treasury yield is up another three basis points to 1.73%, its highest level since the start of the summer. On the short end, futures traders have priced in about a 90% chance of a rate hike between now and year-end.
Tomorrow morning brings September's jobs report and it seems only a string of terribly weak prints would be enough to push the Fed off of its promise to raise rates this year.
Gold is lower by another 1% to $1,255 per ounce - now off nearly $100 per ounce over the past couple of weeks. GLD -1%
Silver today is down 2.25% to $17.30 per ounce - almost $3 per ounce less than its level of two weeks ago. SLV -2.7%
With investors this quarter pouring more than $625.5M into the iShares Silver Trust (NYSEARCA:SLV) - the largest quarterly amount since 2010 - holdings in ETFs backed by silver have climbed to their highest ever, according to Bloomberg.
The popularity surge comes as silver has rallied 39% this year.