The Wild Ride Continues

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The roller coaster ride that is U.S. equities continues at full steam, with extreme price swings resulting in a 1100-point range in the Dow Jones Industrial Average. U.S. equities opened lower and the Dow Jones Industrial Average traded lower during the first part of the trading session. The Dow traded to a new low of 23,778 before finding tentative support and moving sharply off of those lows. With 15 minutes left in the trading day, the Dow is currently up approximately 2.22% with a net gain of 538 points on the day and is currently fixed at 24,878.

After giving up approximately 1800 points from its high, today’s recovery in the Dow reflects U.S. equities as a whole with both the Standard & Poor’s 500 as well as the NASDAQ composite all trading sharply higher, with all three indexes showing net gains of well over 1.5% on the day.

Inasmuch as the last three days have been a virtual roller coaster ride for traders and investors, today’s recovery in U.S. equities is impressive. One of the byproducts of today’s sharp upside move and recovery has been strong bearish pressure on the precious metals complex as a whole.

In an interview with MarketWatch today Naeem Aslam, chief market analyst at ThinkMarkets said, “Against this backdrop, gold isn’t acting like a haven because there is no real panic in the market. In a textbook trade, if there was a real panic in the market, we should see a massive spike in the gold price, but there is nothing like that in the market.  The U.S. Federal Reserve is going to adopt a more aggressive stance towards their monetary policy and this is keeping traders away from gold.”

Gold futures basis the most active April contract is currently trading at 1224.40, down by $12.70, which is a net loss of just under 1% on the day. With the dollar only up fractionally on the day, it is clear that today’s lower pricing is largely due to traders selling the precious yellow metal.

Spot gold is trading under even greater pressure and is currently down $18.70 on the day, priced at $1320.30 per ounce. On closer inspection, a fractionally higher U.S. dollar has had a marginal effect today, accounting for $1.30 of today’s drawdown. The remaining $17.40 directly attributable to sellers in the market, according to the Kitco Gold Index.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer