Gold prices are zigzagging this morning, as the FOMC policy statement looms and April gold futures hit expiry. Automatic sell orders seemed to hit as gold spiked to $1,252 an ounce before the New York open. The spate of selling still failed to push spot prices under yesterday’s $1,243 close, lending strength to that level being new support.
A moderately lower dollar and oil prices hitting new 2016 highs are bullish outside markets for precious metals. at 10:30am, spot gold is up $6 (0.5%,) while silver is up .61% to $17.24. Nymex crude is trading at $45 even, up 2.18%. Brent crude is up 2.23% to $46.76.
Stocks are getting hammered this morning, on news of Apple’s disappointing quarter. Revenue dropped for the first time in the “iPod Era,” and CEO Tim Cook warned of declining sales in the future. The drop in earnings cements Apple’s place as “worst of the Dow,” but it’s the Nasdaq that is getting pummeled this morning.
Gold is looking to log a third day of gains, though that will depend heavily on the policy statement from the Federal Reserve Open Market Committee meeting at 2pm.
The technical outlook for gold sees first support at $1,243 an ounce, which is the overnight low. After this, support should be at $1,240, near yesterday’s low. First resistance is the $1,250 level, which was briefly breached this morning, then 1,256.
The gold and silver markets will see double the usual volatility today, as the April futures contracts of both metals expire today. Speculative traders will have to close out or roll over their positions this morning. This is in addition to the jockeying for position ahead of the FOMC statement. While exactly 0% of surveyed analysts expect a rate hike today, the conjecture over a possible June rate hike will go into overdrive.
One factor in favor of a June rate hike is that Fed Chair Janet Yellen has a press conference scheduled immediately after the release of the policy statement. The CME FedWatch this morning gives a 21% chance of a June rate hike. That number will be constantly refined as economic data comes in.
This week’s oil rally may end up saving various US fracking companies that have been hanging on by a hair. While $45 a barrel may mean survival, salvation looks to be priced at $50. Drillers contacted regarding oil’s recent rally said they are taking a wait and see approach, after believing last year’s short-lived rally.
Reading Fed Tea Leaves
As we mentioned in “Clock Ticking For Fed Rate Hike,” a June rate hike will probably be a non-starter due to the Brexit vote in the UK. The referendum on whether to leave the European Union or not, will take place only 8 days after the FOMC meeting. Janet Yellen most likely is not willing to roll the dice in the face of a possible global economic crisis.
This won’t keep financial celebrities and analysts from heated speculation regarding a June rate hike for the next two months (there’s no FOMC meeting in May.)
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