Gold prices have continued to eke out further gains today. The very poor ISM data yesterday saw the dollar fall against all major currencies and particularly gold.
Bullion is seeing safe haven flows and gains due to increased concerns about the economic outlook. The narrative that the US economy is in recovery is coming into doubt. The weaker than expected ISM data showed a sharp slowdown in the services sector in the U.S. in January.
This means that the Fed will be more likely to put interest rates on hold. Indeed, as we have long contended we believe that the Fed may in time have to decrease interest rates and may follow other leading central banks and have to adopt negative interest rates in the coming months.
Concerns about the global economy slowing down had seen falls in Asian and European share indices and this was the initial impetus for gold to go higher yesterday.
Stocks have come under pressure again in recent days as corporate earnings have disappointed and earning forecasts are being revised lower.
There are also increasing concerns about banks and bank shares have taken a hammering in recent days. Credit Suisse reported worse than expected fourth-quarter results that sent the bank’s shares to a 24-year low and Deutsche Bank shares have fallen 20 per cent since they issued a profit warning on January 20.
Gold has broken above the 200 day moving average which is bullish from a technical perspective. Were it to close above this level this week, it would suggest we may see further gains in February.
LBMA Gold Prices
4 Feb: USD 1,146.25, EUR 1,027.29 and GBP 782.16 per ounce
3 Feb: USD 1,130.00, EUR 1,034.04 and GBP 781.25 per ounce
2 Feb: USD 1,123.60, EUR 1,029.65 and GBP 780.01 per ounce
1 Feb: USD 1,122.00, EUR 1,032.86 and GBP 785.60 per ounce
29 Jan: USD 1,112.90, EUR 1,019.89 and GBP 776.84 per ounce
Gold and Silver News and Commentary
“Dollar weakness and the poor ISM number are the primary drivers this afternoon,” said GoldCore – Reuters via CNBC
“Increased concerns about the economic outlook” said GoldCore – Marketwatch