Consequently, the DXY US Dollar Index extended decline towards the 98.30 area and multi-day lows. US Treasury yields along the entire curve snapped back violently, triggering escalating fears. This drop came at the same time that apprehension was building around the possible impacts of a federal government shutdown. Traders are rushing toward precious metals, as today’s continuing tumult in the financial markets hits new extremes. This sudden influx of new buyers has pushed silver prices to an all-time height of over $54.00 per ounce.
During Thursday’s trading, the EUR/USD currency pair rallied sharply to seven-day highs. It is equally well positioned to test the 1.1700 ceiling anew. The euro continues to make advances against the dollar. This dollar depreciation occurs in a context of growing geopolitical tensions that ultimately act to prevent the dollar from depreciating even more. These tensions between Ukraine and Russia have fostered an atmosphere of uncertainty, leading many investors to re-evaluate their exposure to certain assets.
The dollar has been further pressured by the recent pullback in US Treasury yields. When yields go lower, it increases the currency’s unattractiveness to speculators. Now the specter of an impending government shutdown is injecting new fears into investors’ jitters. They are watching all of the developments of Washington very closely. As negotiations on an infrastructure program or other fiscal stimulus and various budgetary proposals progress, market players are on alert.
And in the face of the dollar’s long march downward, silver has played a starring role for many months. The precious metal’s price rally shows that it’s not just its safe-haven allure that’s driving investment, but strong industrial demand – particularly in technology and renewable energy. Silver prices have been surprisingly sturdy considering this recent volatility combined with more speculative interest and aggressive buying during this recent broader market turmoil.
Gold continued its rally on Thursday, climbing past the $4,300 per troy ounce threshold for the first time ever in nominal terms. Over the last two years, the precious metal inarguably has been one of the biggest beneficiaries of the current economic uncertainty and inflation fears. When geopolitical chaos or economic uncertainty hits, investors tend to rush to gold. Given the stock’s stellar run, it clearly speaks to the market’s current bullish outlook.
At the same time, crude oil prices felt downward pressure with WTI trading back down toward the $57.40 mark per barrel. The Energy Information Administration (EIA) announced a bigger than anticipated build in US crude stocks. This quickly raised fears over oversupply in the market, driving a sharp market downturn. This one-two punch of increasing inventories and geopolitical turmoil has been the story behind crude price volatility in the last month.