Gold Price Caught In Futures Battle

May 26th, 2016 by

gold-rallyGold prices this morning are volatile, as speculators bail on fresh short positions entered Wednesday, which are supporting prices, fight with chart-based selling attempts to push them down.  Prices are bouncing in a tight $9 range between $1,223 and $1,232 an ounce.

Wednesday marked the rollover from the June to the August gold futures contract. Traders who shorted gold near yesterday’s low of $1,217, woke up today to find prices trading around $1,231 — higher, not lower. Therefore, they bought gold contracts to cancel out their shorts.

Technical numbers put first resistance at $1,234, then $1,243. First support comes in at $1,217, then $1,209.

oil-rallyOil prices have hit $50 a barrel for the first time in seven months this morning, assisted by profit-taking in the US dollar, and news that the Libyan National Army, loyal to the elected government that was ousted by Islamist extremists, has advanced on the capital, Tripoli. One likely result of a siege, successful or not, will be the major oil port of Harida in eastern Libya being closed down.

Prices are also being helped by a US Energy Information Agency (EIA) report yesterday that showed US crude stockpiles fell by 4.1 million barrels last week.

Positive Economic numbers in the US are helping stocks, but profit-taking after the recent rally is causing erratic behavior on Wall St. The three major indices are jumping sharply between small gains and smaller losses.

Tesla Car Factory
(photo by Jervetson: Flickr)

First-time jobless claims for last week came in at 268,000, down 10,000 from the previous week. Analysts expected a smaller drop to 275,000. Durable goods saw some eye-opening revisions of March’s numbers. Durable goods for April rose 3.4%, more than ten times the expected 0.3%. The reported increase in March was more than doubled, adjusted to +1.9% from a previously reported 0.8%. Core durable goods for April slightly beat estimates, coming in 0.4% higher, compared to expectations of 0.3%. The real news was the unbelievable adjustment to March’s numbers, from -0.8% to +0.1%.  Revisions like these cause doubt over trusting economic reports to make business decisions.

The weaker dollar is helping crude oil, precious metals, and other commodities. The conviction that the Fed will raise interest rates next month is wavering among some traders, as others bank profits.

yellen_smileAnother factor that may be contributing to consolidation in the dollar is traders getting into a bit of a defensive posture ahead of Fed Chair Janet Yellen’s appearance at Harvard tomorrow. She will be awarded the Radcliffe Medal for her “transformative impact on society.” She is not expected to make any major policy announcements, considering the occasion. Regional Fed presidents have been relentlessly banging the drum on “imminent” rate hikes, but some traders won’t be convinced until they hear Yellen giving sufficiently hawkish statements.

Speaking of rate hike expectations, markets are eagerly awaiting tomorrow’s slate of economic data, including the Commerce Department’s first revision to first quarter GDP. First quarter GDP was initially reported on April 28th to be +0.5%. Consensus expects that number to be almost doubled to 0.9%.

Other reports will be Corporate Profits and Consumer Sentiment.

 

 

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