This was a great week for the gold bulls. Although the metal is currently trading a bit lower on the day, this week can certainly be called a victory by the bulls. The gold bulls clearly reestablished their footing in the market, and in doing so sent those who were still short the gold market running for the exits.
Gold started off the week reclaiming the $1400 level but did not stop there. In fact,the gold market covered over $80 to the upside this week after printing today’s highs earlier in the session in the low $1480’s.
And to think, just a week or so ago many thought that the gold market was “Done” or in the midst of a “Death spiral” that would take prices much lower. The markets are always right-and can turn on a dime. Demand for physical gold bullion has allowed this market to not only stabilize but to regain most of the ground lost recently in the rout. This should serve as an indication just how strong the gold market really is….
Today’s trade saw higher prices earlier in the session before a profit taking reversal set in and took prices lower on the day. It appears that this reversal was nothing more sinister than some profit taking ahead of the weekend.
In fact, the chart could use some consolidation and lower trade before trying to do another leg up. Gold not only reached our initial $1471 target but exceeded it, and therefore today’s price action is not unexpected. This morning the markets got a reading on first quarter GDP that came in well below analyst’s expectations . This disappointment set the tone for the day as equities were sold off a bit and crude oil traded lower.
The stock market did however, recoup the majority of the losses throughout the day. Oil did the same. Perhaps more importantly, the U.S. Dollar Index came under pressure following the release. This could be one of the biggest keys to gold moving higher.
This soft number today may reinforce the Fed in leaving stimulus measures “as is” for the time being. Should the Fed continue to keep the printing presses rolling, the dollar could come under further pressure. Should this come to fruition, gold could stand to benefit as a weaker dollar often leads to stronger gold and commodities.
In addition, the stock market is showing some signs of fatigue. Should a larger scale correction (Not like the selling we saw in stocks last week but much deeper) begin to take shape in equities and risk assets gold could also stand to benefit as investors seek alternative places to put their money.
