Gold prices soared on the New York open, as dismal economic news sent the Dow down to open 400 points in the red. Spot gold hit $1,098 an ounce on the open, up an even $20 per ounce from Thursday's close. Crude futures are down over 4% in early trading, as news that the International Atomic Energy Agency (IAEA) is set to certify that Iran has lived up to its side of the bargain to have international sanctions lifted in return for curtailing its nuclear program.
Stock Market Rollercoaster
Stocks have been extremely volatile to start the year, due to a lack of liquidity as more investors hit the sidelines. U.S. stocks suffered their worst losses in three months on Wednesday, then bounced back the following session. U.S. indices were sharply higher on Thursday after suffering their worst one-day losses in three months on Wednesday, as the Dow Jones gained over 200 points on the day.
Friday was another bloodbath for stocks in the U.S. and abroad, as global indices were all in the red. The dollar fell about 0.5% to 98.6 on the DXY index on a miss for the most recent retail sales numbers. December retail sales fell 0.1% to $448 billion (seasonally-adjusted). The producer price index (PPI) also fell 0.2%, while the Empire State manufacturing index plunged to -19.37 in January. (A reading of just -4.0 was expected.) These indicated that factory activity was weaker.
St. Louis Fed President James Bullard’s comment that reaching the inflation target will take longer was said to have invigorated some of the bulls who were betting on a slower pace of interest-rate increases this year. This dovish view was reiterated this morning by another Fed president, William Dudley, who is both president of the New York Fed and vice-chair of the FOMC. Dudley said that inflation may not rise as fast as the committee has expected, meaning fewer rate hikes in 2016.
In other news affecting the markets, oil was down 4% this morning thanks to the decision by the IAEA to approve Iran's compliance with the recent nuclear deal. This means that the country is ready to send its long-idle massive oil tanker fleet onto the world markets to sell crude, perhaps as early as this weekend.
Meanwhile, China remains mired in a bear market.
The key support levels for the gold price are at $1,079/oz and then $1,071/oz below that, which was the low point for the week. Resistance can be seen at the $1,094/oz level and then $1,100/oz above that.
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