Gold Sees Delayed Consolidation

June 7th, 2016 by

gold-bull-and-bear-marketGold prices eased ever so slightly overnight after hitting a two-week high on Monday. Some (understandable) profit taking occurred out of the gate in New York. This $7 drop was immediately met by traders buying the dip. This consolidation was expected yesterday, after Friday’s $33 jump. Instead, August gold futures gained $4.50 to settle at $1247.40, and spot gold closed up $1.20 at $1244.70.

Technical numbers this morning sees first resistance at $1246, then $1249. First support comes in at $1236, then $1228.

oil-rallyWall St. opened higher led by moderately higher crude prices. Oil futures are up nearly 1% in morning trading, breaking above $50 a barrel to a new 10-month high. The situation in Nigeria is a major factor in the present oil rally. As the Niger Delta Avengers continue to bomb oil pipelines in southern Nigeria, the army is also trying to cope with a major offensive by the Boko Haram terrorist army in the north.

Countering that is the news that the shale industry may be waking up as oil hits $50 a barrel. Baker Hughes reported that nine oil rigs went into production last week. Five of those new rigs were in the Permian Basin. Discounting a one rig gain on March 18, this is the first build in rig numbers since December.

The dollar is attempting to tread water, fighting the effects of Yellen’s dovish speech pushing back expectations of a rate hike from the Fed. The dollar is unlikely to see support from the FEd anytime soon, as experts give a 4% chance of a rate hike next week, and only a 24% chance for a July rate hike.

brexitThe British pound is erasing some of yesterday’s losses, as a fresh batch of polls show the “Remain” side in the Brexit debate regaining ground. In response, the “Leave” side is playing the anti-immigration card as campaigning enters the home stretch. With two weeks remaining before the vote, 20% of Britons are still undecided.

In reaction to the remarkable volatility being seen in the GBP, some houses are raising the margin requirements for pound trades. This volatility and uncertainty should increase risk-off sentiment in the UK and Europe, leading to heightened demand for gold.

Yesterday’s Moves

Stocks faltered momentarily yesterday as Fed Chair Janet Yellen spoke on monetary policy, but quickly recovered when traders noticed she didn’t say “in the coming months.” The DJIA ended up 113.27 points (0.64%), the S&P 500 gained 10.28 points (0.49%), and the Nasdaq rose 26.20 points (0.53%).

Currency markets had already taken June off the rate hike calendar, so Yellen’s dovish remarks had little effect on the dollar. Polls turning sour over the odds of the UK remaining in the EU thrashed the pound to a three-week low.

West Texas intermediate oil futures hit a ten-month high Monday, as global oversupply continued to shrink, due to oilfield disruptions in Canada and Nigeria.

 

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