The price of gold is approaching a new 9-month high
Trading volumes may be lower due to China’s Lunar New Year celebrations, but that hasn’t stopped the gold price from attempting a new higher cycle.
UK and Europe:
- UK FTSE 100 futures are currently up 10.5 points (0.14%) with the spot market currently valued at 7795.17.
- Euro STOXX 50 futures are currently up 9 points (0.22%) with the spot market currently valued at 4,159.82.
- German DAX futures are currently up 18 points (0.12%) with the spot market currently valued at 15,120.95.
US futures:
- DJI futures are currently up 3 points (0.01%).
- S&P 500 futures are now down 4.75 points (-0.04%).
- Nasdaq 100 futures are currently down 0 points (0%).
Business confidence in Australia declined for the third month in a row, according to a NAB survey. While the report notes continued increases in commodity and product prices, it notes a weaker trend that suggests inflationary pressures may have peaked. This helped the ASX 200 hit a fresh 9-month high in hopes of a softer CPI print tomorrow.
Liquidity slipped yesterday as key exchanges in China, Hong Kong and Singapore closed for the Lunar New Year celebrations.
S&P Global releases its final PMI data for Europe, the UK and the US, which also includes composite data and services.
By all accounts, the sectors are shrinking a little faster, which further strengthens the belief that the Fed will change its stance sooner.
While I don’t agree with this view (and expect the Fed to keep rates higher than many think), the fact is that it is this view that drives prices and props up stock prices on the stock exchange.
So the bad news could be good news for Wall Street is the US PMI contract as well as gold prices.
The price of gold is looking to break to a new 9-month high before pulling back later in the session. But the rise in resistance has not been matched by rising volumes, which remain very weak during the Chinese Lunar New Year.
As we see the potential for another crack in the tops, I am aware of the lack of purchasing power and that this will lead to a deeper pullback around 1920-1930 before breaking higher. We would like to see a break above 1938 followed by above average volume to confirm such a break.
While the US dollar was a factor in gold’s strength, the precious metal did well as yields rose for three consecutive days.
But it also gets safe-haven flows on a weaker US economy and a less aggressive Fed tightening cycle. Also note that the sell demand was significantly lower while prices rose and are close to crossing above zero, showing that the buy demand exceeds the sell demand.
Source: Tradingview, Stone X
Going forward, gold looks set to hold above 1900 ahead of Thursday’s US data, and disappointing numbers are likely to help gold push above 1960. But I doubt it will break just $2,000 on the first try given the importance of this level.
Matt Simpson, FOREX.com » Official site
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