Gold the only winner as investors head for the exits

By Trevor Hoey. Published at Apr 13, 2017, in Features

After teetering on the edge for most of the week the Dow finally gave way on Wednesday, falling 0.3% to 20,591 points.

The other major indices also lost ground with the S&P 500 and the NASDAQ falling 0.4% and 0.5% respectively.

As mentioned by FinFeed throughout the week, it is a combination of instability and uncertainty that is weighing on markets and this is reflected in the CBOE Volatility Index which as can be seen below has increased circa 35% in the last week.

While there are concerns regarding geopolitical issues undermining the market, US investors will also receive their first glimpse of reporting season tonight when three of the big banks deliver their first-quarter earnings.

What is worth noting is that they will be cycling against outstanding performances in the previous quarter which set the bar relatively high in terms of first quarter 2017 expectations.

With negative market sentiment being driven by external factors, companies that underperform are likely to be sold down heavily, particularly those that have experienced strong share price gains on the back of the Trump trade.

There were mixed performances in European markets with the main theme being some strong moves in the auto sector after BMW reported first quarter year-on-year sales growth of 5.3%.

Iron ore plunges as gold surges

Offsetting this trend were some sharp falls amongst the miners after iron ore plummeted approximately 8% to US$68.04 per tonne and copper fell 2.5% to US$2.54 per pound, a level it hasn’t traded at since January.

Looking at individual indices, the FTSE 100 shed 0.2% and the DAX gained 0.1%, while the Paris CAC 40 was flat.

Elsewhere on the base metals front, nickel fell more than 1% to US$4.38 per pound. Lead only came off marginally, while zinc recovered some recent lost ground, increasing 1.2% to US$1.18 per pound.

With this backdrop, the likes of Rio Tinto and BHP Billiton are likely to emulate the significant falls they experienced in overseas markets.

The one commodity that should buck the trend is gold after it surged another 1.1% to US$1289 per ounce, closing in on its five month high as can be seen below. The precious metal has now gained circa 7% since mid-March.

The Australian dollar strengthened overnight, and is fetching US$0.753.

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