Gold turns positive as stocks ease on profit-taking ahead of earnings

Though European markets opened firmer, the momentum faded by mind-morning and US index futures lost some ground, leading to a weaker open on Wall Street, which in turn caused gold to turn positive on the day.

The new week started positively for the US dollar and equity markets overnight, causing the buck-denominated gold to fall further out of favour. Japan’s Nikkei set a new record of rising for 15 consecutive sessions and this helped to push the positively-correlating USD/JPY pair to its highest level since 11th July. Investors welcomed Sunday’s victory for Shinzo Abe’s ruling Liberal Democratic party-led coalition. The positive outcome of the snap election will give Mr Abe a fresh mandate for “Abenomics” as he seeks to end years of deflation threatening the Japanese economy. Though European markets opened firmer, too, the momentum faded by mind-morning and US index futures lost some ground, leading to a weaker open on Wall Street, which in turn caused gold to turn positive on the day. But it is a big week for US earnings with approximately 1/3 of the S&P 500 companies set to report their results. Thus, the weakness at the start of today’s US session can be attributed to profit-taking ahead of those earning results. Indeed, generally speaking, risk sentiment remains positive due to the lack of significantly bearish macro factors at the moment combined with a growing global economy, fuelled by historically low interest rates and with many major central banks still engaged in quantitative easing programmes. Investors’ insatiable appetite for risk is remarkable given the extent of the ongoing rally on Wall Street and, as mentioned, the Nikkei’s recent run. While Q3 earning results may cause some volatility for individual stocks, the wider stock market rally may remain intact. In fact, with some European indices now starting to join the fun, it is anyone’s guess how high the markets could go before we see any meaningful correction. As a result, safe haven gold could remain out of favour despite its small recovery. We expect the metal to drift lower in the coming days, unless key resistance around the $1295-$1300 area gives way first, in which case out bearish view would be invalidated. A return to the bottom of the channel around $1250 would not come as major surprise to us. 

Source: eSignal and

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account