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Gold Gains As Shorts Cover

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Gold Gains As Shorts Cover
gold gains

Gold saw a sudden rally Thursday morning, ending up $12 for the best one-day gain in over a month. Prices hit an intraday high of $1,087 an ounce. Spot gold jumped over $10 an ounce in a matter of minutes, as some early bargain hunting triggered a cascade of short covering.

For once, the Fed was responsible for gold gains instead of losses. Fed officials have gone out of their way this week to emphasize that rate hikes will be small and shallow. Since the precious metals market has already priced-in a December hike, indications of a cautious path going forward gave them a boost. Platinum and palladium saw a very welcome rally yesterday as well. Both have been beaten down by a global industrial slump.

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The dollar fell for a second day as "dovish hawkishness" from the Fed pulled support from the greenback's overbought status. Wall St. was unable to extend Wednesday's rally yesterday. The three big indices ended flat as healthcare and energy stocks weighed on the market.

The media blitz by the Fed to push its "go it slow" rate hike plans payed off overseas, as emerging markets and Asian stocks rallied, and European stocks hit 3-month highs before easing.

Will Gold Gains Become Higher Support?

gold-price

Spot gold's $12 jump into the mid-$1,080s level breached old support levels that had become resistance. The market is watching to see if the gold gains will stick, and turn the $1,079 level back into support. If $1,079 is breached, the next support level for gold bulls is $1,073.

The dollar is recovering lost ground this morning, boosted by weakness in the euro caused by ECB leader Mario Draghi's comments that he would raise EU inflation as fast as possible. The dollar strength is counteracting the light gold demand we're seeing.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Steven Cochran

Precious Metals Market Analyst
BS University of South Florida (2002)

A published writer, Steven's coverage of precious metals goes beyond the daily news to explain how ancillary factors affect the market.

Steven specializes in market analysis with an emphasis on stocks, corporate bonds, and government debt. He writes a monthly review of the precious metals markets for SurvivalBlog.com.

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