Gold hit an overnight low of $1,191 an ounce in Asian trading, but had clawed its way back to as high as $1,217 in London, posting a $26 swing. This snaps a two day losing streak for the precious metal as risk appetite returned to stocks after the recent carnage on Wall St. The Empire State manufacturing index remains mired deep in negative territory, disappointing traders who were expecting a less negative reading. This casts the Fed's determination to raise interest rates again as an ill-advised strategy.
We see first support at the psychologically important $1,200 level, followed by the overnight low of $1,191. First resistance is $1,215 (which was tested late in London today,) then $1,227.
The big news in the commodities sector is the announcement of a tentative agreement between Russia, Saudi Arabia, Qatar, and Venezuela to freeze oil production at January levels. This agreement is contingent on all other major oil producers signing on. Iran, who has just been freed from international sanctions, has flatly refused to abandon its plan to increase production to pre-sanction levels.
Oil. which loves a good rumor rally, was briefly up, but settled back down when traders realized that this "agreement" was probably more play-acting by oil producers trying to trick prices higher. The Russian ruble followed roughly the same trajectory as oil on the news.
The dollar is holding on to solid gains this morning, giving gold a little headwind. The larger factor today will be a tussle between those looking to book profits, and those looking to establish a long position before the next rally.
Wall St. opened higher, catching up to yesterday's news after Monday's Presidents Day holiday. The markets are salivating over the announcement of new stimulus measures in China, and ECB president Mario Draghi's comment that the central bank "will not hesitate to act" at next month's policy meeting, if it feels it is warranted.
The markets are going to be very interested in reading the minutes from January's Federal Reserve Open Market Committee meeting. Despite Janet Yellen's assertions that there will be multiple rate hikes this year, the market sees only a 27% chance of any rate hike at all this year. (CME Group FedWatch data for December 2015, using fed funds futures.)
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