For gold bugs, and even for their lesser brethren in silver, not only is the sun shining in the summer months, but the sun is truly shining on gold as a confluence of factors helps to propel the precious metal ever higher, and one wonders when the angst laden doom mongers will appear forecasting an overbought position.
Following big falls in some risk-sensitive assets on the back of North Korea tensions, a number of global stock indices and dollar currency pairs ended the session with impressive reversal-looking technical patterns as the dip buyers evidently stepped in to take advantage of the lower prices (see the technical outlook section below).
Gold has been undermined by rising government bond yields owing to major central banks generally turning more hawkish while the still-buoyant equity markets means there has been reduced demand for the perceived safe haven asset.
After yesterday’s big sell-off, European equities have bounced back and US index futures point to a higher open on Wall Street.
Crude oil was unable to hold onto its gains on Monday after appearing for a while to have ended its bearish run. Oil prices have fallen for three consecutive weeks after the OPEC and Russia failed to surprise the markets with their decision to extend the oil production deal.
Do you remember the halcyon days when rising interest rates and increasing interest rate differentials were the precursor to a stronger currency?
Thanks to soft US economic data of late, expectations about an aggressive rate hiking cycle by the Fed has diminished.
Commodities price are firmer today with base and especially precious metals ending a bad run off losses, while crude oil has extended its gains from the day before when it rallied sharply on the back of the weekly US oil inventories report.
For US equity traders and investors these are worrying times, as the NQ emini continues to blast its way ever higher, and leaving its sister indices becalmed and lacking direction, with the ES emini a classic example.
Whilst gold and silver have a relatively close relationship in terms of associated price action, in the last few weeks these relatively close bedfellows have diverged somewhat, with silver continuing the bearish sentiment initiated in mid April, whilst gold pauses and reflects, with neither metal appearing to benefit greatly from recent weakness in the US dollar (UUP, quote).
