Gold Holds The Line: Morning Market Update Oct 21

October 21st, 2013 by


Gold is trading near Friday’s levels, as traders are encouraged that precious metals held on to Thursday’s gains. Once again, strong physical buying was evident in Asia, which moderated during Euro trading. The dollar is attempting a recovery off 8.5 month lows, strengthening slightly against the yen and Swiss franc as some traders buy in, expecting a robust U.S. jobs report tomorrow. However, the greenback isn’t showing enough strength to affect precious metals at the moment.

Asian markets were up on official news that China is expected to hit its economic projections this year. The Nikkei hit a three-week high on this news, as well as expectations that any tapering of U.S. quantitative easing measures are now pushed back to the spring of 2014. Both the Chinese news and expectations of no tapering in the U.S. helped Euro stocks as well, with the FTSE300 hitting a five-year high.

If Wall St. follows the lead of the Asian and Euro markets, and works toward another record high, it may indirectly help the dollar. Foreign investors will want to buy into the U.S. market, and to do that, they have to buy dollars.

U.S. Treasuries are still suffering over the recent budget grandstanding in Washington, as foreign investors shed their holdings for the fourth straight month and shun new T-bill auctions. The specter of a U.S. default on its sovereign debt, once thought impossible, has severely tainted U.S. bonds as a safe haven. This brings alternatives into play, such as German bunds, and gold.

Analysts see $1,330 as the next resistance level for gold, with a break above this triggering a bull rally. For now, with no fresh economic data due to the government shutdown, gold is reinforcing its Friday trading range.  It’s fairly certain that Santa will not be bringing coal for Wall St. stockings in the form of a taper of the Fed’s $85 billion a month in bond purchases, which will be a bearish factor for the dollar, and therefore a bullish one for gold through New Year’s.

by David Peterson