Gold prices held steady overnight, after a marginal drop in US markets Thursday. Wednesday’s $20 drop immediately after the release of the minutes of the Fed’s April policy meeting not only spooked precious metals, but weighed on stocks. All three indices closed slightly lower Thursday, with the S&P 500 touching its lowest point since March.
June gold futures were hit yesterday with a delayed impact from the fallout over Wednesday’s FOMC minutes. The futures market closed just minutes before the release of the minutes. June gold was down 1.5% to $1,254.80 an ounce.
Spot gold closed slightly lower, shedding a mere $3.30 an ounce to end at $1,254.70. This was near the session high of $1,256.80.
Today’s technical numbers have support at $1,250, then $1,243. The $1,243 level is an important Fibonacci retracement level, according to some analysts. They say that confirmed support at $1,243 will queue another leg up in gold’s 2016 bull market.
First support is at $1,261, then $1,270.
Oil futures are marginally lower this morning, after a close just under unchanged on Thursday. Prices are caught in a tug of war between production outages in Canada (wildfires) and Nigeria (sabotage), on the one hand, and a stronger dollar and increasing US crude stockpiles on the other. The recent gains in oil has thrown a lifeline to energy companies and helped support the Dow and S&P 500. Today marks the change of the front-month contract for WTI, with July orders replacing June.
Venezuela, which is teetering on the brink of total economic collapse, is trying to raise desperately needed hard cash by offering its oil at a huge discount. Venezuela has promised future oil production as payment for billions of dollars in loans from China, and is having trouble pumping enough to meet its monthly payments. Therefore, there is a question of where they are able to find enough spare capacity to sell on the open market.
The dollar is unchanged this morning, digesting its large, Fed-fueled gains. This is giving relief to commodities. Relative strength of currencies was at the top of the list when the Group of 7 finance ministers met today in Japan. The disagreement between Japan and the US over the strength of the yen has spilled over into public. Japan wants to step in and devalue the yen if it gets too strong, and the US says that constitutes currency manipulation that is against the G7 agreement. The meeting broke up with the conclusion that there was no possibility of a coordinated monetary policy among the seven members.
On the ETF front, investors are bailing on equity funds, to the tune of $5.8 billion in outflows just this week. This is the sixth week in a row that investors are jumping off the stock bandwagon. Gold ETFs gained $1.8 billion of inflows this week, for gains in 18 of the last 19 weeks. Bond funds gained $2.8 billion this week.
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