Huge rally in Gold on Friday as fears of escalation in the Near East clearly outweighed downward pressures from a strong Dollar. The CPI release on Thursday was an unexpected surprise to many that saw the Dollar surge upwards in light of higher inflation figures. Unsurprisingly Gold did not initially take the news well, closing in the red as a result. That was quickly forgotten the next day however as the commodity shot up 3.4% to close just over $1932, erasing the previous two weeks’ price action. Silver had an equally impressive run, up 4% on the day to close at $22.70. Predictably, oil was an even bigger mover on Friday, rising over 5% to close above $90 a barrel.
The cautious optimism present in stock markets early last week did not last. The impact of higher than expected inflation data out of the US produced a rally in the Dollar that took the wind out of the sails of most indices. Even the more resilient Asian stock markets eventually fell on Friday, with the Hang Seng ending its six-day winning streak with a dismal -2.33%, closing at 17,813. The Nikkei and Shanghai Comp were also down on Friday, falling 0.55% and 0.64% respectively.
Sentiment did not improve as the European markets opened. The German DAX and French CAC 40 suffering losses of 1.55% and 1.42%, with the UK’s FTSE 100 index also closing 0.59% in the red. The US markets, which had more time on Thursday to process the CPI release, fared slightly better. NASDAQ lost 167 points to close at 13,407; the S&P 500 lost half a percent; the Dow Jones Industrial Average managing to close 0.12% in the black.
If there was a spark of hope that the Fed would finally start decreasing interest rates, then such a spark has once again been snuffed out. The DXY now sits just below levels not seen since almost a year ago. Perhaps traders can hope for less turmoil in the markets this week, but once again, all eyes are on the Israeli-Palestinian conflict.
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