Gold prices are up this morning on “buying the dip” action, as well as accelerated deflation fears. At 10:00am, June gold futures were up $11.00 to $1,230.30. Spot gold was $15.00 higher. A rally in the US dollar is having little effect on the run for gold.
Poor economic data from the EU and falling crude prices are stoking deflation fears in Europe. Stocks are selling off in Europe and the US. About the only stock index in positive territory today is the Shanghai Composite, which closed up 1.45%. This risk-off sentiment has investors piling into safe havens such as government bonds and gold.
Gold futures settled at $1,219.30 an ounce Monday, while spot gold closed down $6.70 at $1,215.20. First support for gold today is $1,225, then yesterday’s low of $1,214. First resistance is the overnight high of $1,238, followed by $1,241.
Monday saw gold down modestly, weighed by lower oil prices and comments from Boston Fed president Eric Rosengren. Considered one of the most dovish of regional Fed presidents, his warning that the Fed will likely raise interest rates sooner than the market thinks pulled stocks and gold down.
Wall St closed moderately lower yesterday, as WTI crude futures fell by 3% to settle at $35.70 a barrel. Oil is logging its third day of losses ahead of US crude stockpile numbers tomorrow, More traders are coming to terms with the fact that the April 17 meeting among major oil producers will not result in a production freeze, much less a cut.
The biggest drop in German factory orders in six months caught European markets by surprise, fanning fears that deflation was threatening the EU’s strongest economy. Another factor worrying European investors is the latest crisis over the Greek debt situation. Wikileaks published what it says are transcripts of IMF conference calls, where the idea of forcing an economic “event” in Greece in order to get Germany to approve debt relief for Athens is discussed. Greece is in worse economic straits than predicted, as it tries to cope with the tens of thousands of immigrants from Turkey flooding its shores.
In the US, the trade deficit for February widened more than expected to the highest level since August 2015. Imports are surging, as a stronger dollar makes them cheaper for US buyers. A growing trade deficit signifies lower domestic output, which subtracts from GDP.
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