The precious metals were strong as markets opened on Wednesday, with the gold price advancing about $10 per ounce and the spot silver price surging more than 3% in early trading. This pushed gold back above $1,320/oz while the argent metal rallied near $18.40/oz, approaching a 1-and-½-year high. Platinum also rallied more than $25 an ounce to crack the $1,000/oz mark.
In addition to stronger sentiment in the precious metal markets, gold and silver prices got a boost from a weaker dollar. The greenback slipped about 0.5% against a basket of its peers, settling near 95.8 on the DXY index this morning. Meanwhile, crude oil prices pulled back from their recent gains.
Yesterday was a welcome ray of hope for equity investors as global stocks posted their first gains in three trading sessions since the momentous Brexit vote last week. All ten sectors of the S&P 500 were in the green as the index gained 1.8%. The Dow Industrials added 1.6% after shedding over 900 points between Friday and Monday.
Nonetheless, both the S&P and the Dow Jones remain below their 200-day moving average (200-DMA), a bearish signal for these stock indices going forward. As the initial shock of the EU referendum in Britain begins to subside, equities around the world are poised to post their second straight day of positive movement.
Gold Still In Vogue
Even with the rebound in stocks, the medium-term outlook for the global economy remains alarmingly uncertain. The modest losses for gold prices over the past two sessions not only appear to be an aberration given Wednesday’s strong advances, but it’s clear that the main underlying cause of the downward action was simply profit-taking. With gold futures closing at nearly a two-year high to start the week, it’s no surprise that plenty of traders were willing to take their ample profits off the table and re-evaluate where the market is going.
In fact, that direction is very likely to be up, according to renowned contrarian investor Marc Faber. Mr. Faber is among the chorus of voices that are calling for gold to be the major bull market going forward as all of the legal confusion over the Brexit vote plays out. Although some market participants are skeptical because the yellow metal has already rallied more than 25% so far in 2016, there’s little doubt that taking cover from volatility in safe havens is the most appropriate response to the uncertainty.
One looming factor contributing to this uncertainty that can’t be ignored is the unclear plans of the Federal Reserve regarding interest rates. There’s widespread speculation that rates will remain low for an extended period of time as economic conditions fail to improve; some are even suggesting that not only is a 2016 rate hike now out of the question, but that we won’t see the Fed move on interest rates until January 2018 at the soonest. There’s even a growing possibility that the central bank will be forced to cut interest rates before it thinks about raising them.
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.