charting gold price

Metals Slide Lower But Steady

January 12th, 2016 by

oriental-gold-demandThe precious metals opened down slightly on Tuesday morning in spite of stocks falling in Asia overnight. However, the Shanghai Composite did manage to close 0.2% in the green, relieving some of the safe haven pressure on gold for the moment. The euro fell against the dollar, which also sapped a bit of the metals’ momentum. However, gold remained in the $1,080/oz to $1,090/oz range.

Resistance is seen at $1,094/oz and the key $1,100/oz level on the high end, while prices may look to break below support at $1,088/oz and fall to $1,074/oz below that.

Spot silver was about 0.5% lower, trading between $13.80/oz and $13.90/oz. Platinum was largely flat at $845/oz while palladium continued to sink lower, losing more than 1% to just $475/oz.

Outside Markets

Equities in the rest of Asia (outside of China) were still in the red overnight, which meant the yellow metal gained in Asia. However, European stocks were solidly higher on Tuesday morning, with U.S. indices following them upward. The Dow Jones and S&P 500 each squeaked out a positive trading day on Monday, but were mostly flat.

oil marketThe dollar traded about 0.3% higher at 99.0 on the DXY index on Tuesday, which took some of the luster off of gold prices, which were 0.8% lower around $1,086/oz. Both crude oil benchmarks were higher in Tuesday morning trading after each slipping below $32/bbl in a loss-filled beginning to the week. The rebound for oil is seen more as a short-covering bounce than a reversal of fortunes. Though both WTI crude and Brent crude were better than 1% higher, each appeared to be losing steam as the morning progressed.

Fidgety Fed

Source: MarketWatch

Source: MarketWatch

After the December FOMC minutes revealed that there was some doubt and dissent among the voting members of the Fed, the individual members of the committee have frequently been questioned about how many rate hikes they expect through the course of 2016. Most consensus estimates place that number at four, but several Fed governors have walked back these expectations by insinuating there may be less. At minimum, this shows that the Fed feels less confident about the economy than it did even a month ago.

The Fed would be naive to ignore the ongoing sell-off mode for global markets. Even as the yen, the crude oil benchmarks, and European equities all bounce back for the moment on Tuesday, there remains a pervasive negative sentiment about the global economy across the markets.

Technical Perspective

Charting-Gold-MarketEven as the gold price has broken back below support, the sell-off in other markets should continue to provide some safe haven buying of bullion. Expert analyst Peter Hug shared what he sees as the clearest technical signals of where gold will move next based on how equities perform:

“Until, and unless[,] the equity markets stabilize, gold will continue to catch a bid and consolidation above the $1,102 level sets the stage for a test of the $1,122 area. A break below the $1,097 level sets up a test of $1,087.”

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.