Gold Prices Rally on Soft Dollar, Stocks

May 11th, 2016 by

Gold prices are seeing a rebound from Monday’s drop, after a day of consolidation on Tuesday. A broadly weaker dollar is helping commodities in general, while earnings have European and US stocks in the red.

gold-rallyGold is up over $10 an ounce this morning, up from yesterday’s marginal gains yesterday. June gold futures lost a paltry $1.80 Tuesday, while spot gold gained an equally paltry $1.90. Gold is off two-week lows this morning, as the dollar is down from two-week highs. Oil prices are choppy, caught in a tug of war between growing supply gluts in the US and Middle East on one side, and production shortages in Canada and Nigeria.

First resistance today is $1,280 an ounce, followed by $1,287. First support is $1,275, followed by $1,270.

Those oil shortages in Canada and Nigeria helped crude prices Tuesday, gaining over 2%.  Prices were also supported by the US Energy Information Agency’s forecast that oil prices would gain nearly 25% next year, to around $50.65. The higher expected prices will result in US oil production falling more slowly than formerly predicted. News that Canadian tar sands operations have already started coming back online means that the missing 1.6 million barrels of oil a day will soon return, and global oil production will once again be logging surpluses.

Stock are broadly lower this morning on both sides of the Atlantic. Equities are being pressured by poor earnings reports from banks, Disney, and Macy’s.

Brazilian president Dilma Rousseff, in happier times

Brazilian president Dilma Rousseff, in happier times

In Brazil, the crisis over their Presidential impeachment proceedings continues to swing wildly back and forth. If the Brazilian Senate votes today to begin impeachment proceedings, president Dilma Rousseff will be suspended from office. Continuous injunction requests by Brazil’s Attorney General and Rousseff loyalist Jose Eduardo Cardozo has failed to stop the proceedings. Brazil is gripped in its worst recession in 100 years. Rousseff is accused of using illegal methods to hide the government’s huge debt during her re-election campaign.  It doesn’t help matters that many lawmakers on both sides of the aisle have been caught up in one of the most pervasive corruption scandals in the nation’s history.

On the gold front, many analysts are saying the recent price action was expected, after bullion was unable to hold on to the $1,300 level after three tries. Gold futures are still up by 20% since January (and silver futures are up 26%.) With more and more market watchers forecasting only one Fed rate hike this year, the dollar will have to gain strength on the backs of rival currencies.

 

 

 

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