Gold prices are under some selling pressure today as stocks, crude oil and the dollar all trade higher. The gold market is likely seeing another round of profit taking today as investor risk appetite is stronger.
The crude oil market continues to maintain trade above the psychologically important $30 per barrel level. While oil has thus far not built on recent gains, the simple fact that oil is not declining right now may be a huge boost to investor sentiment.
Speaking of investor sentiment, stocks have thus far continued to rally in recent weeks and look poised for further upside. While markets can and do change gears swiftly, the SP500 could potentially be headed back towards the 2000 level. Recent price action appears to have some similarities with price action seen in stocks following significant selling and volatility in August and September. Markets were hit hard only to recover and return to near all-time highs. Could such a scenario be in store for stocks again? We’ll see.
Of note for the gold bulls, however, is how the gold market has thus far reacted to higher stocks and increasing risk appetite. Gold has hung in there and while down today, appears to remain in an uptrend. From a technical standpoint, gold has embarked on an upside breakout that could potentially see much higher prices in the coming weeks and months. of course, much of gold’s fortunes will depend on many of the economic and geopolitical factors currently in play.
This morning, investors got the latest reading on fourth quarter GDP. The data showed that the economy grew by one percent from October to December, and this was higher than consensus estimates but lower than the third quarter reading of two percent growth. The better than expected number appears to have markets breathing a sigh of relief, and the dollar index is moving higher. The data is, however, causing some concern over what may be seen in the first quarter.
Markets may now turn their attention to the G20 meeting. Members may be looking for more action from China to stabilize markets and foster growth. In addition, there is even discussion about a coordinated stimulus effort on behalf of member countries. Such a move seems unlikely but has been reportedly backed by the IMF.
Gold may see some further selling pressure in the face of higher stocks and stronger risk appetite. Investors may look at any dips, however, as an opportunity to buy until proven otherwise.
