Risk On, Risk Off
Today’s Spotlight Market
Gold futures have found support in recent sessions, as traders have looked for safe havens for capital. The sell-off in energies and surplus in grains have resulted in softer commodity prices, leaving investors few options. The metals market is also seeing corrective action going into year end, as shortholders look to lock-in profits before the new year. Likewise, the US Dollar Index may see a bit of a correction in the latter portion of the month, after reaching 5-year highs earlier this month. This could offer precious metals some support.
Fundamentals
The global economy still faces many risks in 2015, which may be beneficial to Gold as a safe haven investment. Recent indications from China suggest that manufacturing could be slowing. In Europe, the ECB seems to be fixated on avoiding deflation, which could result in a quantitative easing program there. In the US, the Federal Reserve has pledged to keep interest rates low “for the foreseeable future.” The general theme from central banks seems to suggest fast and loose policy. The drop in energy prices has been a negative force for Gold to this point. However, cheaper Oil could finally awaken the global economy from its slumber, which may stimulate inflationary pressure. There are many things that must fall in line for this to occur, but cheaper Oil will certainly not hurt economic growth in the West.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the February Gold contract rebounding from recent lows around the 1150 mark. Prices confirmed support at this level. Recent price action has put Gold above the 20- and 50-day moving averages. This suggests that a near-term low may have been established. The 100-day moving average has acted as resistance in recent sessions. Solid closes above the average could result in further momentum.
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