Forex Marketz Daily Forex News – Fully Markets Update
The precious yellow metal, gold, has been under selling pressure the last couple of months. Yesterday we saw a round of short covering that shot gold above the key handle of $1,200 per ounce. However, we have a strong U.S. Dollar and worries about global deflation. This should keep the price of gold subdued.
Yesterday, gold shot higher to its highest price level since late October 2014. We saw heavy trading which was up and down overnight. The yellow metal fell to $1,141.10, which attracted bargain buyers after the Swiss referendum for its central bank to hold 20 percent of its reserves in gold failed. Gold futures then quickly reversed and erased those loses. Gold hit a high at $1221.05 per ounce, see the below MT 4 chart. The yellow metal moved lower and ended the day at $1,218.10 per ounce. This was good for a 3.6 percent gain and its biggest intraday movement since April of 2013.
Gold got good news after the Indian government withdrew rules that required gold traders to export 20 percent of their gold they imported into India. This was a move to reign in the burgeoning current account deficit. We knew the Swiss vote was going to fail. What brought the price of gold back higher was the softness in data over three continents that need the yellow metal to stimulate their flagging economies. We had soft PMI readings in Europe and soft data out of Japan. Also China had weaker than expected PMI data. The U.S. is getting ready to announce a weak Black Friday. This means more stimulus and more inflation on the horizon.
This supported gold in the short term.
The move out of India will support the price of gold but will not spark some massive rally shooting price higher over the medium into the long term. India did not erase their tariffs. However, India is the largest consumer of the yellow metal. The market for gold is being pushed higher by developing economies. There are investors there looking for a bargain price. However, there is the strong dollar which will push gold lower once again. If you look at the above chart, you will see the wind being let out of the balloon, so-to-speak.
The drop in price after the vote in Switzerland was nice, but the euro is still too weak for buyers to really jump into gold at this time. Will the rally continue further? I do not think so. If it does then the congestion area marked from $1,220 to $1,225 will keep things in check moving the price back lower.
