Dollar Falters Further and Price of Gold Blows Past its Historic High

July 27, 2020

The dollar weakened to a 22-month trade-weighted low overnight, with losses of 1.0% against the Swiss franc, 0.7% relative to sterling and the euro, 0.8% versus the peso, 0.6% vis-a-vis the yen, kiwi and Australian dollar, and 0.3% against the loonie.

The Covid pandemic intensified over the weekend both globally and in the United States, whose case and death counts represent 26.6% and 23% of the worldwide totals.

America’s image also suffered from relentless urban protests and deepening strains between Washington and Beijing on a wide range of matters. Most of the protests remain peaceful, but looting persists in spots, and suspicion is mounting that this fringe element represents far-right goons. Some wonder if President Trump is orchestrating an event like Reichstag fire as an excuse to declare a military emergency.

The price of gold, which often diverges radically from the dollar and which was trading in the low $1400s a year ago and in the 1770s at the start of this month, soared through its previous all-time high $1917.90 set in August 2011, to an intra-day high today of $1971.3 per ounce.

Share prices overnight were wobbly. Markets closed down 0.5% in India, 0.4% in Hong Kong, and 0.2% in Japan, and losses so fare in Europe amount to 0.4% in Italy, 0.1% in the U.K. and France and 1.4% in Spain.

Ten-year sovereign debt yields fell 3, 2, and 1 basis points in Germany, the U.K. and the United States. West Texas Intermediate crude oil rose 0.8% in price.

Japan’s May index of leading economic indicators got revised 0.9 points lower to a 2-month high of 78.4. The index of coincident economic indicators at 73.4 was also revised down and represents a 132-month low. Japan’s all industry index in May, a monthly supply-side proxy for GDP, sank 3.5% in May. That was the fourth consecutive drop and resulted in a 12-month 17.4% rate of plunge. Industrial production, service-sector activity, and construction were respectively 26.4%, 15.9%, and 6.3% weaker than in May 2019. Japan is grappling with an intensifying coronavirus outbreak, and a released summary of the recent BOJ Policy Board meeting reveals frustration over the delayed economic recovery, concern over the effectiveness of monetary policy, and resignation over the inability to achieve the inflation target.

Chinese corporate profits in the first half of 2020 were 12.8% lower than a year earlier, but for just the month of June there was an on-year increase of 11.5%.

Hong Kong on-year growth in imports and exports was negative 9.4% and -6.7% during the first half of 2020 when a trade deficit of HKD 175 billion resulted.

Germany’s business climate index, a monthly gauge compiled by the IFO Institute, improved for a third straight time and to a 5-month high of 90.5 in July. Business expectations, up 5.4 points to 97.0 rose more sharply that perceived current conditions, which advanced 3.2 points to a reading of 84.5. All the major industrial sectors shared in July’s recovery.

Money and credit growth in the euro area accelerated in June. M3 money recorded an on-year advance of 9.2% in June and 8.8% in 2Q. On-year growth in domestic credit of 7.0% in June followed gains of 6.2% in May and 4.9% in April.

Consumer confidence in Finland printed at a 20-month high in July of -1.6 versus April’s low of -13.9.

Mexico posted its largest monthly trade surplus ever in June, equal to $5.547 billion. But that was only the third surplus in the first half of 2020, that the January-June surplus was just $2.659 billion. Imports in June were 22.2% below their year-earlier level.

U.S. durable goods orders rebounded 7.3% on month in June, a tad more than analysts were predicting, yet they still recorded a huge 13.1% on-year decline in the first half of 2020.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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