Gold prices jumped at the Asian open to their highest levels since March 22nd. Continued weakness in the dollar and more stimulus (quantitative easing) in Europe are assisting gold's rally. Expectations fostered by NY Fed president William Dudley have pushed back the market's estimate for the next interest rate hike in the US. The CME FedWatch program sees just a 3% chance for a rate hike in two weeks, and an 18% chance for June.
Another bullish outside influence for gold this morning is higher oil prices. Both WTI and Brent are up over 1% in early trading. Jitters over what has been called the worst earnings season since the financial crisis also has investors moving into safe havens.
Spot prices at 10am this morning have gold at $1,255.50, up $17.10, WTI crude futures are clocking in at $40.16 (+1.11%,) and Brent futures at $42.43 (+1.17%.) The DXY dollar index is showing further weakness this morning, down 0.25% at 93.99.
June gold futures gained $6.30 to finish the best week in three weeks. Paper gold was up 1.7% for the week. Spot gold was down marginally, losing $1.90 to close at $1,238.40. This was near the session high of $1,243.90.
Today's technical numbers have support at $1,246, then $1,237. First resistance at $1,256 is being tested this morning. A solid break above this line would put $1,261 into play.
Dollar No Match For Yen
Much to the Bank of Japan's dismay, the yen has taken on the US dollar's role as the top safe haven currency. The Japanese central bank's unprecedented stimulus measures, including negative interest rates, has been aimed at devaluing the yen and boosting Japanese exports. However, the failure of BoJ policy measures have the public losing confidence in the central bank. This could make additional quantitative easing measures even less effective than the present ones have been.These circumstances present the very real possibility of Japan slipping back into a deflationary spiral.
The yen is up for the seventh day in a row, and the dollar has fallen to a 17-month low against the currency of the Rising Sun.
Stocks Following Crude's Cue
Crude futures blasted up over 6% on Friday, rescuing Wall St from daily losses. As it was, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all ended the week at a loss, dropping more than 1%.
Despite the very low probability of anything actually coming out of next Sundays global oil summit, crude futures ended the week up over 8%. Some of this optimism is from US shale production finally showing a noticeable slowdown. A surprise drawdown of US crude reserves also helped sentiment.
The Baker Hughes rig count Friday showed that 8 more oil rigs were taken offline, bringing the total of active rigs to 354. This is the lowest number since November of 2009.
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