Gold Getting Top Heavy?
Today’s Spotlight Market
Gold futures have started the year off on a very strong note, driven by economic uncertainty and regression in the US Dollar.? After the strong start, though, metal traders may be a bit fatigued, which may lead to a bit of profit-taking.? Gold fundamentals and outside market fundamentals generally could be seen as favorable to the bull camp.? Last week?s surprisingly dovish FOMC policy statement could be seen as very bearish for the US Dollar Index, which normally moves inverse to Gold prices.
Fundamentals
The March FOMC policy statement could be seen as a game changer for the US Dollar.? Some traders had already become increasingly bearish in their opinion of the greenback, and expectations for rate hikes had been scaled back.? However, not many market watchers were expecting the central back to halve their rate increase outlook. This could change the trajectory for the currency.? Conversely, the Fed announcement came at an opportune time for Gold traders.? It seems as though some traders were cooling a bit on Gold prices.? The metal?s value as a defensive instrument was high to start the year.? Lately, the defensive value has been eroding due to better economic outlooks in Europe and the US.? The economic optimism is not strong enough to drive inflation hedging, and global growth potential seems to have a low ceiling in 2016.? It is an awkward spot for Gold.? Not only could slow growth not spark inflation fear, but demand for industrial use could remain lackluster.? The Crude Oil rally also has stolen Gold?s thunder, and investors may be seeing more upside potential for petroleum in light of the sharp sell-off from October of last year through early February.? Retail investors could provide a safety net and prevent sharper retracement.?? Assets in the SPDR Gold Trust jumped to 818.98 tons on Friday, the highest level since December 16, 2013, suggesting healthy demand from retail traders.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the rally in April Gold starting to stall.? The recent closes below the 20-day moving average suggest that a near-term high may be in place.? This is supported by the failure of the April contract to retest recent highs.? It is of interest to note that the RSI and Momentum indicators are showing negative divergence to prices, which suggests prices could take a turn lower.
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