Gold prices rallied along with the stock market from oversold
levels Tuesday as investors cast overwhelming support for
precious metals and energy producers on Election Day.
Spot gold dashed 1.79% to $1,716.20 an ounce, rebounding from
a sharp sell-off the prior two days in which it fell as low as
$1,683 an ounce.
"The gold December contract appears to have found support at
the $1,684 an ounce level today," says Janice Dorn, co-founder of
Jtrader.us. "We still cannot rule out a test of the $1,650 an
ounce level or lower."
"We believe that gold at $1,685 would not, in our opinion,
reflect any further expansion of the Fed's balance sheet -- even
though we believe that the Fed will likely continue to expand its
balance sheet," Walter de Wet, a commodities analyst, and his
colleagues wrote in a client note for Standard Bank. They believe
gold is fairly valued at $1,740 an ounce.
Standard Bank's note added: "The Fed is not going to respond
to stronger-than-expected data with tighter policy and, more
importantly, the interest rate markets are not going to expect
the Fed to change course.
"The Fed believes that rates won't start to rise until
mid-2015 at the earliest, and the market seems to buy this view.
If rates can't rise materially on strong data, the dollar is
unlikely to rise materially."
The dollar and gold tend to trade opposite each other as a
weak dollar makes dollar-denominated commodities more expensive.
PowerShares DB U.S.
Dollar Index Bullish (
), measuring the greenback against a basket of foreign
currencies, shed 0.23% to 22.07.
What's more, gold demand in Asia increased when gold fell
below $1,700 an ounce, and speculative buying in the futures
market has dropped substantially.
SPDR Gold Shares (
), tracking a 10th of an ounce of bullion, jumped 1.82% to 166.20
in heavy volume. It rebounded after nearly touching its long-term
200-day moving average last week.
Market Vectors Gold Miners ETF (
) climbed 2.64% to 23.70. It's held above its 200-day average
after breaking below the short-term 50-day line last week, which
means its long-term uptrend remains in tact.
Silver Regains Shine
Spot silver surged 2.82% to 32.16.
IShares Silver Trust (
) vaulted 2.92% to 31.05 in slightly above-average volume as it
bounced off key support at its 200-day moving average, which is
"The 50-day moving average is still rising and maintains
upward momentum," Trading Central told clients, recommending they
buy SLV and sell if it breaks below 29.50.
Silver Miners ETF (
) rose 0.33% to 24.22. It rebounded from a pullback to the 50-day
average, which is very bullish.
Stock Market Overview
Energy producers led the SPDR S&P 500 (SPY) higher in its
0.96% rise to 143.21. It's consolidating below its 50-day line
and its direction appears unclear at this point.
"While the U.S. presidential election is the dominant headline
factor for markets today, there are several important
international data points that should be digested," Waverly
Advisors wrote in a client note. "First, the Australian central
bank's decision not to raise rates was driven by a view that
growth is back on track in China and, to a much more moderate
degree the U.S."
Keep in mind that commodity-centric Australia is prone to
inflation, they noted.
Energy Select Sector SPDR (XLE), the most popular ETF tracking
the sector, lifted 1.86% to 72.93. But low volume suggests a lack
of investor conviction.
U.S. traded crude oil jumped 3.4% to 88.54 as it bounced off a
four-month low. It trades deep below its 50- and 200-day moving
averages, which is very bearish. Today's action has to be
considered an oversold bounce or countertrend rally in a
long-term downtrend. This tends to happen when short-sellers, who
profit from falling prices, close their trades by buying back the
positions, and thereby boost demand.
"Refinery shutdowns in the (hurricane) affected region are
expected to have pushed crude oil stocks higher, while product
inventories should have weakened," Marc Ground, an analyst with
Standard Bank, wrote in a commodities report. "However, this is
only the short-term impact.
"The potentially more significant impact of the shutdown of
transportation in the region on product and crude oil demand will
most likely take longer to appear in the data."
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