Gold prices have hit a 4-week high this morning, as a risk-off contagion in equity markets spread from Asia to the US. Wall St. has opened lower, but is hoping to snap a two-day losing streak. The US dollar is struggling to remain in positive territory, but the British pound is feeling even more poorly. The GBP has posted an 8-week low against the dollar, which launched sterling-denominated gold prices up by 1.9%, to £909.83, its highest in over two years.
Gold is testing resistance at $1,287 this morning. A break of this level would put $1,295 into play, but this would be a stretch. First support is at $1,274. This is backstopped by the $1,268 level.
Gold prices are up 6% in the last ten days. This rally was ignited by one of the worst non-farm payrolls reports in recent memory, and has fed on oil prices, a weaker dollar, and Brexit fears.
Citi analysts this morning noted that gold is correlating more closely to Brexit fears than the US dollar lately, saying "Gold has fluctuated in line with the Brexit opinion polls, even dislocating it from its usual primary-link with the U.S. dollar."
August gold futures closed $3.20 higher at $1275.90 an ounce, the highest in more than three weeks. Paper gold gained 2.7% for the week.
Spot gold gained $3.80 to end the week at $1273.30, near the top of the day's trading range. The big gains gold has seen recently has some analysts wondering if $1,260 is now in gold's rearview mirror. If so, $1,300 may be in the cards in the not-so-distant future.
Silver went on a monster tear last week, gaining 5.9% for the week. July silver contracts ended at $17.22 an ounce. This is the largest weekly gain for the white metal in 8 weeks.
At last Friday's close, gold futures were up 20.44% year-to-date, and silver futures were up 25.12% year-to-date
As is usual lately, falling oil prices pulled energy stocks down. Even-lower bond yields put pressure on bank stocks Friday as well. The Dow ended 119 points (0.66%) lower. The S&P 500 shed 19 points (0.91%) and the Nasdaq fell 64 points (1.29%) lower.
According to Torsten Slok, chief international economist at Deutsche Bank, foreign investors are dumping US stocks at the fastest rate ever.
The dollar saw some safe haven demand Friday, an action that usually moves toward yen and Swiss francs lately.
That stronger dollar teamed up with the news that the US oil rig count had increased for the second week in a row to send WTI crude down 3% to $49.07. Brent crude dropped 2.7% to end at %$50.54 a barrel. Both contracts were saved from weekly losses by impressive gains earlier in the week.
Attack of the Central Banks
Tomorrow starts the two-day Federal Reserve Open Market Committee meeting. While no one believes that a rate hike will be announced, traders will be ready to pounce on anything the Fed Chair Janet Yellen says in her post-meeting statement to the press that could be construed as being hawkish. The aftermath of the Brexit vote will likely play a major role in the Fed's decision in July.
Wednesday will be a busy day, as not only does the Fed announce interest rate policy, so does the Bank of England and the Bank of Japan. Thursday, it's the turn of the Swiss National Bank.
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