Posted on January 30, 2015
Gold prices are moving slightly higher this morning as stocks are notably weaker while crude oil and the dollar index trade near the flat line.
The latest data on fourth quarter GDP showed a slowing economy with 2.6 percent growth. Consensus estimates were looking for growth of three percent. This miss has caused stock index futures to turn sharply lower, while gold, silver and treasuries are all moving higher.
Increased volatility in global stock markets may help keep a floor under gold prices, and general risk aversion will also likely lend the yellow metal some support.
The Russian Central Bank cut its key interest rate last night, only a month after hiking rates to try and stimulate the struggling Russian economy. Rates were cut from 17 percent to fifteen percent, and still remain highly elevated compared to most other countries’ rate levels.
The ongoing Ukraine conflict has brought heavy sanctions to Russia, and the country appears to be feeling the effects of those sanctions.
The Federal reserve this week said that it would be patient with regards to hiking interest rates. While the central bank did not give any direct clues, there has been increasing speculation that the Fed might decide to hold off on raising rates given current growth concerns.
Fed Chairwoman Janet Yellen has given an upbeat assessment on the U.S. economy this week, and for now it would seem likely that the Fed holds course and initiates the first rate hike in either June or September.
The notion of a rate hike has been priced into the precious metals markets already, and if the Fed does raise rates it likely will not have any dramatic impact on gold prices. On the other hand, should the Fed decide to hold off on the first hike, it could give gold and silver a boost. Precious metals do not appear overly concerned with the notion of rate hikes, as it seems clear that even if the Fed does start to tighten, rates will remain relatively low for some time.
Gold failed to hold the psychologically important $1300 level and has pulled back in recent days. The gold market may find some support in the $1260 area and the $1240 area. Given the recent uptrend in gold prices, a pullback comes as no surprise and even with the recent selling the uptrend remains intact.
The market may see a period of consolidation before the gold bulls attempt another run at $1300. Trade below the $1240 level may drive more longs out of the market and gold could potentially see increased selling pressure.