Profit taking hit the big gold rally Monday, after prices broke through a 15-month high at the $1,300 level. Spot gold closed near unchanged, down just $1.50 at $1.290.90. June gold futures gained $5.30 to close at $1295.80.
Thanks to a weaker dollar and a down day for stocks in Europe and Asia, gold is making another run at the $1,300 barrier this morning. briefly broke through that level in London overnight. Prices have eased somewhat since then, to trade just above yesterday’s close in New York.
First support this morning is $1,294 an ounce, with the next support level at $1,288. First resistance is $1,296, then $1,300.
Gold continues to find support from stock market jitters and a weaker US dollar. Some Asian markets rallied today, on moves by their governments. Chinese stocks rallied after Chinese president Xi Jinping announced Politburo support for a healthy stock market. Down in the Southwest Pacific, the Reserve Bank of Australia made a surprise cut in benchmark interest rates, in order to stave off disinflation.
The dollar is falling for the fourth day in a row, as the euro breaks above 1.16 versus the greenback overnight. The Japanese yen also continues its assault on the greenback, recording a new 18-month high. Some analysts are saying that it could break the major psychological barrier of 100 to the dollar in the near future, While the ever-falling dollar is sure to please Janet Yellen at the Federal Reserve, her compatriots in Europe and Japan are likely tearing their hair out. A stronger currency makes exports more expensive, which decreases demand. This is exactly what these central banks do NOT want, as they struggle to improve their economies.
June Nymex crude futures fell more than $1 yesterday, to drop under $45 a barrel. WTI oil contracts settled 2.5% lower, at $44.78. July Brent crude futures fell $1.54 (-3.3%) to close at $45.83 a barrel. The sell-off is continuing today, as the market braces for an increase in the US oil glut.
Wall St. is down more than 1% this morning, giving up all of yesterday’s gains and then some. US stocks are following European markets lower, on worries about a slowing global (Chinese) economy and a reversal of the oil rally.
Stocks and commodities in general may go into defensive mode ahead of Friday’s non-farm payroll report for April. This is considered the biggest economic report of the month, and will have a great effect on the Federal Reserve’s plans for future rate hikes.
We will be getting a sneak peek at those numbers tomorrow, with the ADP private payrolls report. While this report does not cover local, state, and Federal government jobs, traders look to it for guidance ahead of the official payroll numbers.
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