Gold and silver rallied over 1% and 2% yesterday as stock markets barely made gains in the US.
Gold fell 2.2% yesterday (silver -3.1%) as increasing risk appetite saw stock markets in the US surge. A rally in stock markets was overdue but the sustainability of this latest rally is doubtful and equity markets in Asia were mixed and after a lower start, are tentatively higher in Europe.
After the bounce in recent days, gold sold off again yesterday and was down 2.77% (silver -3.2%). After the falls seen in the last two weeks a period of consolidation will be needed and gold may fall further prior to rising strongly above the psychological and technical level of $1,000/oz.
With $50 trillion having been wiped off the value of assets internationally (primarily property and equities) there will likely be a long term shift towards risk aversion and wealth preservation.
Gold’s recent downward trend may have ended last week after gold closed moderately higher for the week (gold +0.03% and silver +1.75%). The performance was impressive considering the continuing steep declines in stock markets (Nasdaq , DJIA, S&P down 6.1%, 6.17% and 7.03% respectively).
Gold’s outlook remains extremely positive especially as big money interests are once again realizing the safe haven attributes of the yellow metal.
As expected gold bounced yesterday after its recent sharp falls. Gold’s lack of correlation with equities (gold has occasional very short term correlation with equities) was seen again as gold and silver were up some 2% while major US indices were down by some 4%.
Citigroup, once the world’s largest bank, fell below $1 per share and General Motors is struggling to avoid bankruptcy.
Gold fell for the seventh straight day yesterday and is now down nearly 9% from its recent high just above $1,000/oz – see chart below).
Gold had become overbought in the short term and had risen over 24% in just over a month ($806/oz on January 14th to over $1,000/oz on February 20th ).
Asian stock markets followed their US counterparts in falling overnight and after an initial rally in Europe, indices are again under pressure (especially the FTSE which is down another 1.8%).
Gold has fallen as well but not by as much as most equity indices. While US indices were down between 4% and 5% yesterday, gold was only down by $3.00 to $938.80/oz.
Gold rose sharply in Asia and was up by more than $10 per ounce before trading even commenced on the TOCOM – it rose from $941.60/oz to nearly $960/oz but has given up some of those gains in early trading in London and is now trading back at $950/oz.
Gold and silver fell over 5% and 9% last week after surging in the previous weeks and remain up nearly 8% and 17% so far in 2009. In the short term anything can happen in all of these markets and volatility remains very high in all markets. Correction and consolidation was expected and warned of.