Gold prices were trading sharply lower first thing this morning as investors again showed a greater appetite for equities over the safe-haven metals after earnings results from Apple and Facebook both came in much better than expected last night. However, a sharp reversal followed in the afternoon which saw both gold and silver prices swing into the positive territory. It is difficult to pinpoint exactly what caused this reaction. Although some would point to news headlines concerning Ukraine, which, admittedly, did cause Brent crude prices to rally, this could not have been the sole reason. After all, copper prices, which has little, if anything, to do with the situation in Ukraine, jumped too. I think it was simply a case of unwillingness from the sellers to commit to prices below $1276/7 and $19.00 for gold and silver, respectively.
The $1276/7 level was the base gold had formed at the start April which was revisited earlier this week. As the price of gold was unable to hold below this level, speculators moved quickly to close (some of) their sell positions which caused prices to rally sharply. This so called short-squeeze saw the price of gold climb from a low of $1268 earlier in the day to a high of nearly $1300 where the 200-day moving average has acted as resistance. The metal now needs to break above this level as well in order to catch the attention of fresh buyers. It has also been encouraging to see there were no further outflows this week from the world’s largest gold-backed ETF, the SPDR Gold Trust. However, unless ETF investors come back in force, the prospects of sustained gains for the yellow metal appear unlikely.
Figure 1:
Source: FOREX.com.
Figure 1:
Source: FOREX.com.
General Risk Warning for stocks, cryptocurrencies, ETP, FX & CFD Trading. Investment assets are leveraged products. Trading related to foreign exchange, commodities, financial indices, stocks, ETP, cryptocurrencies, and other underlying variables carry a high level of risk and can result in the loss of all of your investment. As such, variable investments may not be appropriate for all investors. You should not invest money that you cannot afford to lose. Before deciding to trade, you should become aware of all the risks associated with trading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall Witbrew LLC and associates have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to investment trading or (b) any direct, indirect, special, consequential or incidental damages whatsoever.
Recommended Content
Editors’ Picks
AUD/USD holds hot Australian CPI-led gains above 0.6500
AUD/USD consolidates hot Australian CPI data-led strong gains above 0.6500 in early Europe on Wednesday. The Australian CPI rose 1% in QoQ in Q1 against the 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY sticks to 34-year high near 154.90 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.