Spot gold this morning is holding on to yesterday’s robust gains, despite a bullish CPI report interrupting its early rally. April gold settled Thursday at $1,226.30, up $14.20. Spot gold ended the day up a whopping $22.30 (1.85%) to close at $1,230.70, after a robust rally throughout the day. First support should be seen at $1,220, then $1,209. First resistance is currently being tested at $1,230. The next hurdle will be $1,235.
Outside influences this morning in addition to the report on consumer prices are a nasty drop in crude oil which pulled stocks into a lower open. Lower oil prices also had a negative effect on European stocks. The dollar is struggling to get into the black. It’s next goal is to gain that last little bit to hit 97 on the DXY index.
Consumer prices in the US for January were flat compared to January, but up 1.4% year to year. Core CPI, which strips out energy and food, was up 0.3% for the month, compared to an expected 0.1%. The main factors for the increase were medical care and rent/mortgages. These were counteracted by big drops in gasoline and oil.
Stocks and oil prices continue to cling together like slow dancers at a high school prom. Oil’s reversal yesterday on a build in crude stockpiles pulled stocks down as well. The energy sector is setting the direction for stocks recently. Given how volatile crude prices have been, to have them setting the path for the entire stock market is a bit concerning.
Speaking of crude prices, the US Energy Information Agency reported yesterday that crude stockpiles in the US set another high of 504.1 million barrels (over 21 billion gallons.) This is the highest backlog of oil since the beginning of the Great Depression.
Adding to global unease this morning is news that US warplanes carried out an airstrike on a Daesh safehouse in western Libya, targeting a senior leader of Libyan operations. Reports indicate that approximately 60 terrorists were asleep in the house when the pre-dawn raid struck. An estimated 41 were killed, and others wounded.
Since China is still digesting all the gold that was gifted during the recent Lunar New Year, it has been primarily the West that has driven this rally. In fact, gold hit a ten-month high in Europe yesterday. Another bright note for Western gold demand is the news that inflow to gold ETFs in the first six weeks of the year after totally wiped out all the outflows for last year. (154 tons vs 138 tons.)
In what has become a monthly ritual, both the Chinese and Russian central banks reported increasing their gold holdings last month. The Chinese bought 16 tons while Moscow purchased 13.8 tons.
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