While speculative buyers may have controlled the price action last week, risk sentiment may determine the direction of the market this week. Another surge in the stock market could weigh on demand for gold. However, if stocks begin to sell-off on year-end profit-taking then gold could be underpinned.
After consolidating for six weeks, gold futures broke out to the upside last week, reaching its highest level since November 4. Some traders said the holiday-shortened, low-volume week had a lot to do with the move since there weren’t any major players in the market to stop the rally. Other traders said the buying was sparse and that most of the move was fueled by buy stops.
Last week, February Comex gold settled at $1518.10, up $37.20 or +2.51%.
Traders also said gold rose because of concerns over the U.S.-China trade deal. Apparently, speculators were buying gold because of the delay in signing the agreement. This didn’t seem to stop investors from driving stocks to record highs, however.
A weaker dollar was also blamed for the rise in gold. This makes sense because a cheaper U.S. Dollar tends to drive up foreign demand for dollar-denominated gold. Hedgers dumped greenback positions bought as protection against a prolonged U.S.-China trade war. Now that tensions have eased, they no longer view the dollar as a safe-haven asset.
The argument for worrying about the signing of the trade deal is weak because both the U.S. and China acknowledged the delay is being caused by translation issues. Furthermore, China said it is in close contact with the United States, and President Trump said the “deal is done.” He also said there is going to be a signing ceremony.
The argument for thin-trading conditions and a weaker dollar driving prices higher seems real to me. We’ll find out this week soon enough. Although we’re looking at another holiday shortened week volume should improve a little as some of the major players begin to trickle back into the markets.
It’s another holiday-shortened week so trading volume is expected to come in below average, but likely higher than last week. This should lead to increased volatility.
While speculative buyers may have controlled the price action last week, risk sentiment may determine the direction of the market this week. Another surge in the stock market could weigh on demand for gold. However, if stocks begin to sell-off on year-end profit-taking then gold could be underpinned.
Traders will also be watching the price action in the U.S. Dollar. A weak dollar will be supportive.
The major U.S. economic developments include Chicago PMI on Monday, the Conference Board Consumer Confidence report on Tuesday, the ISM Manufacturing PMI report and the FOMC Meeting Minutes on Friday.
Last week, February Comex gold settled at $1518.10, up $37.20 or +2.51%.
Traders also said gold rose because of concerns over the U.S.-China trade deal. Apparently, speculators were buying gold because of the delay in signing the agreement. This didn’t seem to stop investors from driving stocks to record highs, however.
A weaker dollar was also blamed for the rise in gold. This makes sense because a cheaper U.S. Dollar tends to drive up foreign demand for dollar-denominated gold. Hedgers dumped greenback positions bought as protection against a prolonged U.S.-China trade war. Now that tensions have eased, they no longer view the dollar as a safe-haven asset.
The argument for worrying about the signing of the trade deal is weak because both the U.S. and China acknowledged the delay is being caused by translation issues. Furthermore, China said it is in close contact with the United States, and President Trump said the “deal is done.” He also said there is going to be a signing ceremony.
The argument for thin-trading conditions and a weaker dollar driving prices higher seems real to me. We’ll find out this week soon enough. Although we’re looking at another holiday shortened week volume should improve a little as some of the major players begin to trickle back into the markets.
Weekly Forecast
The key question to be answered this week: Will the major players chase prices higher or play for a pullback into support?It’s another holiday-shortened week so trading volume is expected to come in below average, but likely higher than last week. This should lead to increased volatility.
While speculative buyers may have controlled the price action last week, risk sentiment may determine the direction of the market this week. Another surge in the stock market could weigh on demand for gold. However, if stocks begin to sell-off on year-end profit-taking then gold could be underpinned.
Traders will also be watching the price action in the U.S. Dollar. A weak dollar will be supportive.
The major U.S. economic developments include Chicago PMI on Monday, the Conference Board Consumer Confidence report on Tuesday, the ISM Manufacturing PMI report and the FOMC Meeting Minutes on Friday.
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