Gold Jumps To 4-Month High On Dollar Slump
Today’s Spotlight Market
Gold futures have gotten a boost from a weaker US Dollar and such a poor showing in US economic data.? Weaker US retail sales numbers follow weak non-farm payrolls data earlier this month, suggesting the Federal Reserve may have their hands tied when dealing with interest rates.? Just weeks ago, the idea that the Fed would raise rates by year?s end was seen as a done deal by many traders.? Now, many traders are doubting the Fed will have the justification for the rate hike by year?s end, even if data vastly improves over the next two and a half months.??
Fundamentals
A major driving force behind the recent rally in metals prices has been a short-covering by small speculators betting on a strong greenback.? The US Dollar will be extremely sensitive to economic data, given the currency?s relative strength is built on the foundation that rates will rise.? It will be interesting to see if Gold can maintain the momentum from the short-covering and Dollar sell-off.? The US Dollar Index is currently at a technically vulnerable level, hovering just above support.?? Failure to hold this support level could result in further technical selling, which could support further Gold advances.? However, inflation remains a non-factor for the precious metals market.? Chinese producer prices fell by 5.9% in September, which is the 43rd straight monthly decline.? It also marks the worst reading in 6 years.? With energy prices potentially succumbing to weak demand and further increases in supplies, Gold may face resistance from outside markets.
Technical Notes – View Today’s Chart
Turning to the chart, we see the December Gold contract breaking through resistance at the 1175.00 level yesterday.? The breakout, however, does not appear to be a convincing one at this time.? Wednesday?s candlestick has a fairly sizable upper and lower wick and a slightly compact body, which could be a sign of some indecision.? The next few sessions could be seen as pretty significant in the near-term.? Traders may want to keep an eye out for confirmation of the breakout or a reversal pattern.? The RSI indicator is currently at overbought levels, which? could put a little pressure on prices.
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