Gold had been flirting with the $1,800 level over the past few sessions, however, comments from Ben Bernanke coupled with robust economic data simultaneously paved the way for profit taking on Wednesday. Selling pressures hit the precious yellow metal hard after comments from the Fed painted a conservatively-optimistic outlook for the U.S. economy, putting a damper on inflation expectations. Gold prices dropped over 4% on the day as Chairman Bernanke’s testimony did not offer any indications that another round of quantitative easing would be initiated [see Why Warren Buffett Hates Gold].
Stock markets started off the week on a shaky note after durable goods orders data missed expectations, although a surge in consumer confidence helped investors brush off worries about the domestic recovery. The big news on Wednesday was the better-than-expected GDP report; economic output in the fourth quarter came in at 3%, blowing past the previous reading of 2.8%. Safe haven demand for Treasuries and precious metals alike dropped off as investors instead rejoiced over encouraging fundamental economic data [see Doomsday Special: 7 Hard Asset Investments You Can Hold In Your Hand].
Technical Glance
Consider the daily gold futures chart below. Notice that trading volumes went through the roof when selling pressures hit yesterday. The precious metal was quick to back away from resistance at the $1,800 level; the last time gold encountered pressures at this level was on 11/8/2011, and the precious metal proceeded to fall below $1,600 in the weeks following. What’s worrisome this time around is the fact that trading volumes were very high, which may lead some to believe that the price action was more than mere profit-taking, and perhaps a reversal point [see also Seven Reasons To Hate Gold As An Investment]. If gold prices fail to hold above $1,700 in the coming days, investors should note that the next level of major support lies near the $1,600 an ounce level.
Click To Enlarge
Ways To Play
Investors who wish to short gold, believing the precious metal has been long overdue for a correction, or those who want to buy in on the dip have a multitude of instruments available at their fingertips. Traders will likely opt for the most direct method which is through the April GC Gold futures contract offered on the COMEX. The April contract is currently the most heavily-traded future and will offer the best liquidity.
However, not everyone is savvy to futures markets as they can be quite complex and difficult to understand. Mainstream investors should consider GLD, which is an extremely popular ETF that measures physical bullion. For cost-conscious investors who prefer the ETF structure over the long-haul, the iShares Gold Trust (IAU) also offers physical gold exposure at 15 basis points less than GLD.
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Disclosure: No positions at time of writing.
[...] Stocks on Wall Street edged higher with a few bumps along the way as investors digested a plateful of mixed economic data. Good news included improving jobless claims data as well as an increase in consumer spending. Worse-than-expected data kept the lid on gains; a slight downtick in manufacturing coupled with a bad month for construction spending reminded investors that the recovery at home is still fragile. Gold finished the day slightly higher near $1,720 an ounce, while crude oil futures hit a multi-month high of $110.55 a barrel [see Gold Hits Resistance, Time To Worry?]. [...]
[...] Stocks on Wall Street edged higher with a few bumps along the way as investors digested a plateful of mixed economic data. Good news included improving jobless claims data as well as an increase in consumer spending. Worse-than-expected data kept the lid on gains; a slight downtick in manufacturing coupled with a bad month for construction spending reminded investors that the recovery at home is still fragile. Gold finished the day slightly higher near $1,720 an ounce, while crude oil futures hit a multi-month high of $110.55 a barrel [see Gold Hits Resistance, Time To Worry?]. [...]
[...] better-than-expected consumer confidence data as well as GDP results earlier in the week [see also Gold Hits Resistance, Time To Worry?]. At the back of this bullish momentum, the leading issuer behind emerging markets products, [...]
[...] Gold Hits Resistance, Time To Worry? at CommodityHQ: [...]
[...] Wall Street ended Friday on a shaky note, although bullish momentum throughout the week pushed major indexes into positive territory. Investors digested a better-than-expected consumer confidence report coupled with robust GDP results; economic growth on the home front came in at 3%, which helped to clear up the clouds of uncertainty looming over ongoing recovery efforts. Ben Bernanke surprised investors on Wednesday after the Fed Chairman made no hints of an upcoming round of stimulus, which sparked a sell-off in the gold futures market [see Gold Hits Resistance, Time To Worry?]. [...]
[...] Equity markets seemed to take a breather this week, easing off last week’s wild rally and closing out in negative territory by the end of Friday’s trading session. Small cap equities have been under the microscope lately as the sector struggles to keep up with the recent bullish market. For some investors, this lagging should be a cause for concern as small caps typically perform better during market rallies. On the commodities front, gold simply got slaughtered on Wednesday, plummeting over 4% as investors digested the latest news from the Federal Reserve Bank. Contrary to expectations, Ben Bernanke made no mention of an upcoming round of quantitative easing, which kept a tight lid on investors’ inflation expectations (see Gold Hits Resistance, Time To Worry?). [...]
[...] that there would be an additional round of quantitative easing like many had anticipated [see Gold Hits Resistance, Time To Worry?]. Several key economic data releases from all over the globe as well as ongoing developments in the [...]
[...] GLD have come under pressure ever since failing to break resistance at the $1,800 level 2/29/2012; this is a noteworthy observation seeing as how this ETF previously failed to break above the same level back on 11/8/2011. Another cause for concern is the relatively high volume that came with the sell-off last week on 2/29/2012. Trading volumes that day were at their highest levels since the previous major sell-off that came after gold prices hit $1,923 an ounce [see Gold Hits Resistance, Time To Worry?] [...]
[...] Last week saw equities continue their surge, as the Dow made a case to hold well above the 13,000 level and the S&P was able to cross the 1,400 benchmark. While a number of investors are cheering on the rally, the rapid rise has many worried that some kind of pullback is overdue and that stocks may be unable to maintain current levels. But we have heard calls for a pullback all year long and markets have simply continued to charge onward. Looking ahead to the coming week, there will be several key economic indicators released all over the world, but for all intents and purposes, it will be a relatively quiet period compared to weeks past [see also Gold Hits Resistance, Time To Worry?]. [...]
[...] Last week saw equities continue their surge, as the Dow made a case to hold well above the 13,000 level and the S&P was able to cross the 1,400 benchmark. While a number of investors are cheering on the rally, the rapid rise has many worried that some kind of pullback is overdue and that stocks may be unable to maintain current levels. But we have heard calls for a pullback all year long and markets have simply continued to charge onward. Looking ahead to the coming week, there will be several key economic indicators released all over the world, but for all intents and purposes, it will be a relatively quiet period compared to weeks past [see also Gold Hits Resistance, Time To Worry?]. [...]
[...] Domestic equity indexes started off in the gutter on Tuesday so to speak after the latest housing market data sparked a wave of profit taking across Wall Street. Investors fretted over worse-than-expected housing starts in February; this figure came in at 698,000 versus the previous month’s reading of 706,000. Gold slid lower alongside stocks on the day as futures prices for the precious yellow metal shed just over 1%, settling near $1,650 an ounce [see also Gold Hits Resistance, Time To Worry?]. [...]
[...] as investors tweak their portfolio to favorably position themselves as the recovery picks up [see Gold Hits Resistance, Time To Worry?]. The precious metal will come into focus later today following the release of the weekly jobless [...]
[...] as investors tweak their portfolio to favorably position themselves as the recovery picks up [see Gold Hits Resistance, Time To Worry?]. The precious metal will come into focus later today following the release of the weekly jobless [...]
[...] investors tweak their portfolio to agreeably position themselves as a liberation picks adult [see Gold Hits Resistance, Time To Worry?]. The changed steel will come into concentration after currently following a recover of a weekly [...]
[...] Translation: Here is where a lot of people take major issue with the fund, and the above language is what has sparked a lot of controversy in the first place. Basically, it means that the issuer does not have the inalienable right to visit the vault at will to inspect the gold. In fact, the subcustodian, or the people involved with physically storing the bullion, can outright deny admission for inspection to the trustee. Justifying that last statement from a legal standpoint is a bit more difficult, but part of it likely comes from the fact that the vault can’t have people showing up at will asking to see the gold. This may actually be a safeguard put in place to ensure that nobody views the gold under false pretenses and makes off some precious bullion, after all, this is one of the most secure vaults in the world [see also Gold Hits Resistance, Time To Worry?]. [...]
[...] Bearish pressures prevailed on Wednesday as major equity indexes on Wall Street fell victim to profit taking after a less-than-stellar durable goods data release. The Dow Jones Industrial Average led the way lower for a second trading session in a row, shedding 0.54% on the day, while Nasdaq and S&P 500 tied, each losing 0.49% on the day. Surprisingly, gold headed south alongside equity markets; futures prices for the precious metal lost upwards of 1% on the day, settling near $1,660 an ounce [see Gold Hits Resistance, Time To Worry?]. [...]
[...] 0.49% on the day. Surprisingly, gold headed south alongside equity markets. Futures prices for the precious metal lost upward of 1% on the day, settling near $1,660 an [...]
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