Gold is retesting major resistance at the 200-Day Moving Average for a third day today in early morning trading. Prices are being supported by a fall in the US dollar, which is struggling this morning after the ISM service sector Purchasing Managers Index in the US fell sharply.
Gold jumped at the New York open today, triggering pre-placed sell orders when the price exceeded $1,133 an ounce. The drop was short-lived, as buyers quickly stepped in to send the price back over the heavy resistance level of $1,129. Buying shot upward on the disappointing services PMI report, sending the gold price over $1,135 an ounce.
Crude oil futures are higher this morning, pausing a free-fall that beat down global equities. The first two days of this week saw oil futures wipe out nearly all the 20% gain from a four-day rally in late January sparked by rumors of a production cut by Russia and OPEC. WTI prices dropped 5.5% Tuesday to settle under $30 a barrel, while Brent fell 4.4% . The oversold status of crude is resulting in a rally today that is being helped by a sharply lower dollar. With US and Chinese manufacturing in contraction, oil demand (and prices) are still assumed to be heading lower this year.
The dollar is taking a drubbing this morning, posting a loss of over 1% after the surprisingly bad ISM service sector PMI report for January. The gauge in December was 55.8, and analysts expected a modest decline to 55.1 in January. Instead, they were greeted this morning with a shockingly low read of 53.5. The greenback is seeing no help from Asia, as the yen continues to see strong safe haven demand.
With manufacturing and services both falling, the odds of Janet Yellen and the Fed raising interest rates AT ALL this year have dropped to 50%.
Gold is working against a very strong resistance level in the $1,129/$1,130 range. The 200 DMA sits at $1129,40 today, reinforcing the sturdiness of this level. Today, we see first resistance at this mark. If a convincing breakthrough can be accomplished, the next hurdle will be $1,136 (the 61.8% Fibonacci retracement from the October high/December low movement.)
Support at the $1.124 level is continuing to hold. The next line of defense for gold bulls occurs at the $1,119 mark.
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