WEEKEND WRAP: US Dollar Scorched As Gold, Silver Shine; Bonds Bid, Stocks Flat, Oil Up

Shifting forces were at work the second last week of July, and while the winds of change didn't quite blow stocks away, the dollar's value, precious metals and bond yields saw wild swings.

Bloomberg's dollar index finished the week at 94.435, edging below the level seen at the trough of the March stock market lows (94.895), and lower for the year (96.389, 12/31/19). It was also the lowest recorded reading since September 2018 (94.220).

While the dollar may have been reeling against competing fiat currencies, it was dealt a knockdown blow by precious metals, especially silver, which had it's best week in more than 40 years. Spot Silver closed at 19.33 per ounce on July 17, traded as high as 23.00 on July 22 before settling into a close at 22.77 on the 24th, a gain of 17.80% in just five trading days.

Gold was also making headlines, with spot gold closing out the week at 1,902.02, a record closing price, surpassing the previous high in US$ of 1895.60 from 2011. While the dollar's weakness was a contributing factor in the rise of precious metals, it wasn't the only one. Continued strong demand, which many dealers are calling "unprecedented", massive purchases by the gold and silver ETF funds, and shortages due to mining shutdowns over the past four months have all been weighing on gold and silver prices.

With faith in fiat currencies and the governments that rule by them weakening, gold, silver, and other hard assets are beginning to be looked upon more favorably as the global economy melts away, multi-national protests persist, and unemployment rages. The first rise in initial weekly US unemployment claims in nearly four months sent shock waves across markets and had a dampening effect on stocks in particular.

WTI crude oil, which had remained moored around the $40/barrel mark for most of the month, was bid slightly higher during the week, closing above $41 for the first time since March. Producers, desperate for higher prices see the falling dollar as an aid to their plight. Global prices are in flux, especially with China buying directly from many producers, including Russia and Iran, bypassing the long-standing dollar hegemony completely. If the dollar continues to decline, the price of oil will certainly rise, affecting just about every finished product in some manner. The condition appears ripe for $50 oil and $2.00 gas at the pump though seasonal demand could keep a lid on prices through the fall.

Treasury yields fell on the long end, with the 30-year taking the brunt of the action, closing out the week at 1.23%, a decline of a full 10 basis points from the previous Friday reading. The benchmark 10-year note slipped from 0.64% to 0.59%, and persisted through Thursday and Friday at that level. Even the one-month maturity bill fell from 0.11 to 0.10%, cramming the entire complex into a 113 basis point box.

The shift in sentiment from bullish on stocks to mildly bearish was, in the main, attributable to the decimation in second quarter earnings as companies lost ground across the equity spectrum. Tech, energy, finance, consumer, and industrial sectors were all affected by the shutdowns and stay-at-home orders prevalent during the second quarter and that was reflected in some very dismal reports, especially from banks and finance stocks, which were forced to add significantly to credit loss reserves over the quarter.

With the reopening of most state economies in the US, there was hope for some relief and a return to pre-COVID conditions, but the recent rise of infections in many states has caused a reversal of the reopening protocols and has tempered enthusiasm for a quick recovery. The COVID crisis seems to have a long-lasting effect, not just on people's health but on the economy in general. The outlook for the fall is not particularly promising either.

Wrapping up this Weekend Wrap, here are the most current prices - including shipping - for select precious metal items on eBay:

Item: Low / High / Average / Median
1 oz silver coin: 27.11 / 46.85 / 35.34 / 34.97
1 oz silver bar: 28.00 / 51.95 / 34.33 / 33.75
1 oz gold coin: 1,850.00 / 2,045.42 / 1,982.27 / 1,995.10
1 oz gold bar: 1,985.22 / 2,019.69 / 2,006.68 / 2,010.15

At the Close, Friday, July 24, 2020:
Dow: 26,469.89, -182.44 (-0.68%)
NASDAQ: 10,363.18, -98.24 (-0.94%)
S&P 500: 3,215.63, -20.03 (-0.62%)
NYSE: 12,461.78, -49.09 (-0.39%)

For the Week:
Dow: -202.06 (-0.76%)
NASDAQ: -140.01 (1.33%)
S&P 500: -9.10 (-0.28%)
NYSE: +59.04 (+0.48%)