Gold is moving sharply higher today to begin the new trading week as ongoing risk aversion and technical momentum drive prices higher. Stocks are under significant selling pressure once again as crude oil prices fall back below the $30 per barrel level. Of particular note this morning is gold’s strength in spite of a higher dollar index.
Currently, investors are anxious over the ongoing concerns about China’s economy, falling crude oil prices, the threat of global deflation and more. As if that it is not enough to consider, North Korea is once again causing concern after it says it launched a satellite into space on Sunday. While the country claims this launch was for scientific and peaceful purposes, it is being viewed by some as a front to test a ballistic missile. The launch prompted a wave of international condemnation and an emergency meeting by the U.N. Security Council.
North Korea had ruffled feathers just a few weeks ago when it claimed to have successfully tested an H-bomb last month.
Investors will likely pay close attention to any further developments coming out of North Korea and these recent actions by the nation could keep risk aversion elevated.
Investors have had a chance to digest last Friday’s non-farm payrolls data for January at this point, and there will likely be ongoing debate about the timing and pace of further rate hikes by the Fed. Some analysts believe that the data may keep the central bank on hold for now, and that a rate hike in March could be delayed. Any forbearances in rate hikes could potentially drive further buying in gold and precious metals.
This week is considerably lighter from a data perspective. Investors will get the latest readings on Wholesale Trade, MBA Mortgage Applications, Weekly Jobless Claims, Retail Sales and Consumer Sentiment. While any of these reports could potentially be market-moving, investors will likely remain focused on the bigger picture.
Equities could potentially see further downside as the path of least resistance appears to be lower. Further weakness in stocks could potentially fuel further strength in gold as investors potentially seek out alternatives.
Gold is currently approaching the $1200 per ounce level and could potentially see even more interest on a break above this level. In the meantime, any dips in gold may now be purchased. The path of least resistance remains higher in the short-term until proven otherwise.
