From the Trading Desk
Overnight, Chinese economic data revealed worse than expected GDP growth (y/y) for 2015 with the figure coming in at 6.90% versus 7.30% a year earlier. It was the slowest growth rate for 25 years but the Shanghai Composite Index ended up rallying over 3% on the day. Investors shrugged off the disappointing GDP figures and instead focused on the People Bank of China’s decision to inject $91 billion of funds into the market in order to meet medium-term liquidity demand. The central bank also said it would cut its three month interest rate to 2.75%.
The Chinese equity momentum carried over to the US market initially but the Dow was unable to maintain gains and sold off as the session wore on. Gold didn’t have much of a reaction to the volatile equity market or crude oil losing another 3% today. The market is range bound with sellers happily emerging as gold reaches into the mid-$1,090s and buyers lifting it back up as it approaches down to its 50 day moving average.
While we are stuck in the range with gold we can still look to the dollar for some clarification on trend. I noticed that gold slowly moved up today as the dollar moved from 99.40 to 98.85 and then gold topped out after going green for a minute and proceeded to fall as gold moved back up to the 99.15 range. It’s nice to see them trade hand in hand but the miners have not. The miners are much weaker and JDST broke out to new monthly highs today.
Volatility has increased too and you would think this to be bullish for gold but it is not happening yet.
Right now we need to see the dollar break and stay below 99 for any chance at a bounce in the short term. Any move higher in the dollar coupled with a stock market bounce could just be the ingredients necessary to get gold under $1,050 and onward to test the $1,000 mark.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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