Today's Market View - US dollar rally trigger precious metal sell off

London (March 28)  Gold back-tracks as the dollar extends gains and bonds continue to rally.

• The yield on 10-year Treasuries dropped to the lowest since December 2017, with recent data showing weakness in U.S. housing and consumer sentiment stoking concerns over the health of the economy.

• Fed funds futures are also now pricing in more than 30 basis points of easing by the end of 2019, suggesting at least one quarter-point cut.

• The safe haven asset also falters as China’s economy signals the beginning of a recovery as a Bloomberg Economics gauge aggregates the earliest available indicators on market sentiment and business conditions. A Standard Chartered gauge of more than 500 small and medium businesses surged to the highest in 10 months as the government directed credit and announced the largest tax reduction on record.

• Stocks and smaller business sentiment led gains, while a trade gauge and sales manager survey also signaled a broader pickup.

• News that China and the U.S. are closing in on a trade deal also offers reasons for optimism, though a grim outlook for global commerce is a lingering basis for caution.

• Deflated copper prices and the worst profits since the global financial crisis across Chinese industrial companies highlight underlying concerns.

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