Gold prices are a little lower today as markets are calmer this morning overall. Gold is trading lower by a few dollars per ounce, while stock are slightly higher, crude oil is slightly lower and the dollar index is gaining.
Overnight, Chinese stocks opened higher and finished the day with solid gains. This comes just a day after the Chinese stock market saw its shortest trading day in history. On Thursday, Chinese markets were only open for about 30 minutes before circuit breakers designed to reduce panic and volatility were triggered. U.S. markets opened yesterday sharply lower as the route in stocks seen this week continued. U.S. equities opened higher this morning, however, following last night’s calmer Chinese session.
This morning, investors got the release of the non-farm payrolls data for December. The data came in beating consensus estimates as the country added 292,000 jobs last month. Estimates were looking for just 210,000 jobs added. While this better than expected data gave stock index futures a boost initially, the initial gains from the data have largely evaporated. China will likely remain the key point of focus for investors right now, as further volatility in Chinese markets may continue to drive volatility in other global markets.
In addition to worries over China, falling crude oil prices and the whiff of deflation in the air may also weigh on investor sentiment. As of this post, crude oil is trading below the $33 per barrel mark and could potentially have further downside to go.
Gold prices have risen from the $1060 level in the last few sessions and appear to be in the midst of an upside breakout. Overall risk aversion and short covering are likely driving the buying seen in gold in recent days as investors look for alternatives. The Dow Jones has reportedly recorded its worst start to a new year on record, and if stocks remain under pressure gold could potentially stand to garner further buying interest.
Of course, the volatility seen in Chinese markets this week reared its ugly head back in August and September. U.S. stocks fell dramatically during that period before stabilizing. Stocks then proceeded to regain their footing and march right back close to their all-time highs. It remains unclear if such a scenario will play out again in U.S. markets following the recent drop, however, the possibility certainly exists. While weaker stocks and risk aversion have boosted gold in recent days, a reversal in equities
also has the potential to drive profit taking and even fresh short selling in the yellow metal.
In addition to many economic and geopolitical issues being monitored by investors, markets will also pay close attention to any commentary from the Fed regarding the pace of further interest rate hikes this year.
