Gold’s gains in overnight trading held over into the New York open before this morning’s durable goods report. The rebound from January’s losses beat caught the market by surprise by beating estimates. The new caused gold to dip to the $1,228 level before rapidly regaining previous levels in the mid- $1,230s. April gold futures closed yesterday up 1.4% to settle at $1,239.10, a gain of $16.50. Gold futures are up over 16.5% for the year to date.
First technical support for gold today should be seen at $1,230. If that fails to hold, next support should be the overnight low of $1,221. First resistance is at $1,238 (which was tested overnight,) with $1,242 being the next hurdle.
Wall St. put its best foot forward at the opening bell, looking to shrug off another Shanghai Meltdown in Chinese stocks and lower oil prices. However, it stumbled out of the gate after opening higher. European stocks did not seem to have the same problem, up nearly 2% across the board. The Shanghai Composite closed down 6.4% today, the steepest decline in almost a month.
Durable goods orders that were higher than expected gave the dollar a lift out of negative territory, but the greenback is looking at another volatile day. Overall durable goods orders for January were up 4.9%, compared to estimates of 2.5%. The report was also responsible for Wall St.’s higher open.
However, non-defense durable goods ex-aircraft came in negative at 00.4%, after a revised December climb of 0.9% As this is the only portion of the durable goods report that is taken into account in GDP calculations, the good feelings over the headline numbers quickly evaporated.
Oil futures closed higher yesterday after a rollercoaster ride, as drops in gasoline stocks offset news of a 3.5 million barrel increase in US crude stockpiles. US oil stockpiles stand at 507.6 million barrels, a level not seen since 1930. After thinking it over overnight, traders decided that the crude build outweighed the drop in gasoline stocks. Brent crude was down 1.8% and WTI down 2.5% in early trading. A Wednesday statement by the Saudi oil minister that there was “no sense in wasting our time seeking production cuts,” also has traders stepping lightly.
With the exception of earnings reports from major companies, the only real market driver for stocks continues to be oil prices. This has a spillover effect for gold, as safe haven demand waxes and wanes. However, there are a growing number of people who are sick of worrying over day to day volatility, and want some protection from the risks of the current equities market and negative interest rates. Others believe that gold prices have put in a bottom. These are the buyers that are maintaining a strong undercurrent to gold demand.
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