Gold Prices Down on Risk-On Mood

April 13th, 2016 by

The dollar rally which began yesterday gained speed this morning, depressing gold prices. Gold is bouncing up and down off session lows of $1,242 an ounce, as good economic news from China vies with bad news in the US.

Wall St. opened higher, following Asian and European stocks upward. Oil futures are lower after hitting a high for 2016 yesterday. A build in US crude stockpiles that was triple estimates, combined with the emphatic statement by the Saudi oil minister that a production cut was completely out of the question, saw Nymex crude down 1.5% this morning.

Spot gold is trading at $1,247, down $8.50 but $5 higher than this morning’s low. The dollar’s snapping of a seven-day losing streak is keeping pressure on bullion prices. Technical numbers look to have first support at that $1,242 low. The next support level should be $1,237. First resistance is at this morning’s high (and yesterday’s low) of $1,251. Next resistance will be $1,256.

Yesterday’s bullion action saw June gold futures extended their rally, gaining $2.90 to settle at $1,260.90. Spot gold was caught in a late rush of people locking in profits before Chinese trade data was released last night, closing at $1,255.70, down $2.40.

The Risk Is On

chasing yieldsWest Texas Intermediate futures closed at a high for the year Tuesday, lifting energy stocks and the broader stock market. A rumor originating from Interfax that said Saudi Arabia and Russia had made a separate agreement to freeze oil production sent oil prices up 4.5%.

Stocks are extending yesterday’s oil-fueled rally, but the impetus today is economic news out of China. Exports for March gained a big 11.5%, after a very dismal -25.4% in February. The March number was sharply higher than expectations of only 6.5%. Imports were down 7.6%, adding to the good news. The MSCI Asia Pacific Index closed at a high for the year on the news. Stock gains were also assisted by the Bank of Japan employing Jedi mind tricks to weaken the yen.

European stocks followed Asia higher, pushing Wall St. to open solidly higher as well. Bad economic news in the US this morning reduces the chance of a June interest rate hike by the Fed. Combine this with signs that China’s economy is recovering, and you have the recipe for a stock rally.

Retail sales in the US surprised traders by falling instead of rising. Analysts were looking for a 0.1% increase, but instead got a -0.3% reading. Core retail sales, which strip out energy and food costs, rose by 01.%, one-third of the expected 0.3%.

Producer prices also disappointed, by posting losses instead of gains. Higher oil prices were expected to push wholesale prices up by 0.3%. Actual numbers came in at -0.1%. That increase in wholesale goods prices from more expensive oil was counteracted by a drop in wholesale services.

Tomorrow’s big reports will include consumer prices in the EU and US, as well as US first-time jobless claims.

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