The gold market is seeing some moderate selling pressure today as equities continue to climb higher, crude oil declines and the dollar index moves higher. Overall risk appetite in the marketplace continues to appear elevated and thus may be pressuring perceived safe haven assets such as gold and silver.
Stocks are trading at the highest levels in several weeks and could very well be poised for another run at fresh all-time highs. As long as stocks remain on solid footing, the gold market may be vulnerable to profit taking and a further pullback.
The biggest story of the trading week was Wednesday’s release of the latest FOMC statement. The central bank appears to be less eager to raise rates and the dovish tone of its remarks sent the dollar index tumbling. Should the dollar continue to work lower, it could potentially work in gold’s favor. With the Fed likely to be less aggressive in its tightening, investors may continue to buy stocks and other risk assets until more clarity is provided by the central bank.
The recent gains in the crude oil market are also helping to fuel investor risk appetite. Oil is now trading firmly above the $40 per barrel level, and further short covering and bargain hunting could potentially drive black gold even higher. As stock markets seemingly traded in unison with oil for some time, the recent respite of selling in crude oil has given equities a lift and investors may be feeling more confident about the economy.
While gold has seen some moderate selling earlier this week, the market has since recovered much of the decline. The trend in gold is still pointing to higher prices and the “buy the dips” mentality appears to remain in place. To see a period of consolidation and back and fill trade would not come as much of a surprise at this point, and the bulls may look to be buyers on any significant dips. A move above the recent highs in gold could potentially set the stage for another significant leg higher in price.
Of course, the gold market may be driven in the coming weeks by the dollar index, fresh global economic news and the equity markets. Should equities begin to decline again, gold could potentially be off to the races as investors could seek out alternative asset classes to put capital to work in.
