While both equities and oil retreated from the beginning of the week, gold followed up a strong start with another rally on Tuesday, taking out the key $1,200 level.
Gold for February delivery rose $11.50, or 1%, to $1,206.40 an ounce. March silver added 16 cents to $16.44 an ounce. Silver is in general more volatile and presents quick gain opportunities to traders.
Normally, the fall in oil prices would drag gold down with it. They do consistently, but not always trade in tandem. That is not the case in the current markets scenario. The nosedive in oil is so sharp that it finally is rattling the equities markets around the globe. The impact of oil prices on energy sector stocks is significant in many markets.
Gold prices now rebound as weak global economic data and a declining stock markets revived safe-haven demand for the precious metal. China, which relies on exports to fuel economic growth, reported its exports rose more slowly, while Japan’s economy shrank for a second straight quarter. In Europe, Germany’s industrial production barely grew. The World Bank cut growth forecast for Russia as well.
In November, Gold futures dipped low enough to attract new buying attention, and levels recovered to $1141.70 after bottoming out at $1132.00. On December 1, gold rose to its best level since October, above the key $1,200 level. This rebound has put the market in a good position to form a higher bottom and closing price reversal bottom, in part due to last week’s decision by OPEC to not cut its production – a decision that seems to have already been absorbed by the market.
In a surprise move last week, India repealed a law that had required traders to export 20% of the gold imported into the country. Although the Indian government didn’t wipe the tariffs away, it does have an effect on gold prices because the country is the first or second-largest consumer. So, even though this move by the Indian government is an important factor for gold futures, it isn’t enough to ignite a massive rally.
