Multiple Factors Heighten Bullish Market Sentiment for Gold

Today both gold and silver continued the dynamic rally that been the undertone to the precious metals recently. Over the last five consecutive trading days gold has closed above its opening price. The last three trading days can be characterized as having higher highs, and higher lows than the previous day.

Last week gold only had one trading day that had an extended and exaggerated price range, and that occurred on September 18^th when Federal Reserve members voted to implement a rate cut of ¼%. On that day gold traded to the lowest price point of $1491, before recovering and closing at $1515. Since September 10^th the second lowest trading price in gold came in at $1492.

There are multiple factors and events that have been the forces moving gold prices higher recently. Today updated data from the European Union added more fuel to the fire.

According to MorningStar, “Helping fuel concerns of an economic slowdown were data that indicated manufacturing activity in the eurozone contracted more sharply in September, posting its worst reading in nearly seven years (link). The flash eurozone manufacturing purchasing managers index (PMI) fell to an 83-month low of 45.6 in September, down from 47 in August. Economists polled by FactSet had forecast a 47.3 reading -- a figure of less than 50 indicates activity declined.”

In addition to this new data concerns regarding the trade war between the United States and China have become more prominent in market sentiment. Last week’s announcement by Chinese officials revealed that they are canceling visits to U.S. farm states this week.

MorningStar also reported that, “At the end of the last week, trade talks were mostly positive with one major exception, the Chinese abrupt cancellation to visit a farm in Montana. While the news pretty much derailed the last attempt for U.S. stocks to hit fresh record highs, we should not see agricultural purchases be a key hurdle for the Chinese,” wrote Edward Moya, senior market analyst at OANDA.

When you take these events and add the current geopolitical turmoil in the Middle East, between Iran and Saudi Arabia, with the announcement that President Trump sent troops to Saudi Arabia, concerns continue to dampen any optimism of a quick resolution. Also, there was more protesting as well as violence in Hong Kong over the weekend.

Collectively these events have moved gold futures $14.40 higher today. After factoring in today’s gains, the December contract of Comex gold is currently fixed at $1529.50. With so many factors contributing to the bullish market sentiment in gold it seems likely that gold could continue to move higher throughout the week.

Wishing you as always, good trading,