Safe Haven and Risk-On Environment Characterize Today’s Markets

Any uptick in the closing prices of US equities today represented a new all-time record high. The Dow Jones closed up 9.23 points, the Standard & Poor’s 500 closed up 3.29 point, and the NASDAQ composite close up 22 points on the day. These upticks resulted in all three indexes closing in uncharted territory, and therefore new record highs.

At the same time safe haven market sentiment move both gold and silver pricing higher on the day. The key however with both gold and silver pricing is that they have been dramatically range bound over the last few weeks, and today’s $12 gain in gold prices simply took current pricing to the very top of the range.

Today’s gains in gold pricing were for the most part a direct result of buyers bidding up the precious yellow metal. Physical gold closed up $11.10 today and is currently fixed at $1280.50. Of the $11.10 gain $8.80 is directly attributable to buying, with the remaining $2.30 as a reflection of a weaker US dollar, this according to the Kitco Gold Index (KGX).

A dramatic spike in oil pricing today was largely responsible for the shift to safe haven market sentiment. Crude oil closed up over 3% (+1.69) and settled at $57.33 per barrel in today’s trading. The large spike in oil is largely due to a Saudi corruption purge in which three of the kingdoms richest individuals were placed under arrest.

As reported in Bloomberg News “The stunning series of arrests has implicated three of the country’s richest people, including Prince Alwaleed bin Talal, who’s No. 50 on the Bloomberg Billionaires Index ranking of the world’s 500 richest people, with $19 billion. Also being held are the kingdom’s second- and fifth-wealthiest people, as well as a travel-agency mogul and Bakr Binladin, a scion of a one of the country’s biggest construction empires.” Higher oil pricing can be a sign of higher inflationary numbers down the road, and therefore bullish for gold pricing.

Gold Still Defined Within Its Narrow Trading Range

Over the last couple of weeks gold has been caught in a narrow and defined trading range. Recent lows of $1260 an ounce have defined the major support level on a technical basis in gold. At the same time recent highs of approximately $1282 per ounce have defined absolute resistance. Given that today’s move in gold was substantial, it is still trading within the defined range that has existed over the last few weeks. Although gold prices have traded above resistance over this time period, today’s pricing in gold is the first occasion in which it closed just at or above its current resistance level.

Wishing you as always, good trading,