Gold drifts lower ahead of FOMC meeting minutes

Wednesday, January 08, 2014

US stocks rebounded yesterday on an improving trade balance as the S&P 500 snapped a three day losing streak, adding 0.61% throughout the session while the DJIA pushed 0.64% higher. Investors were encouraged by the narrowing trade deficit which fell to -$34.3bn in November from -$39.3bn the previous month, well below the median estimate of -$40bn expected by economists according to Bloomberg data. Markets are poised to push higher with investors eagerly anticipating ADP employment change data which analysts estimate will have added 200K positions in December as well as weekly US crude oil inventories, which are expected to have declined by 1.65m barrels during the week ending January 3rd. Any positive surprise will reinforce the Fed’s tapering schedule which was announced last month, further supporting an encouraging 2014 outlook for the US economy.

Spot gold prices snapped a 5 day bull run yesterday as intraday price moves met with resistance towards the 50 day MA at $1,250. The recovery was stopped short as the dollar index strengthened ahead of the release of December’s FOMC meeting minutes later today. Prices have since pulled back further this morning, finding weak support around the $1,220-30 area.

The IMF will raise its forecast for world growth as confidence in global markets returns and growth prospects in the US and other developed markets improve. According to Bloomberg Christine Lagarde commented that forecasts would be revised up in the coming weeks as a faster than expected recovery in US labour markets support the view that the global economy is on a stable path. Volatility, as measured by the CBOE VIX has fallen in recent months after spiking significantly higher several times throughout 2013 and with a definite timeline for tapering announced last month, side-lined investors may be encouraged back into risk assets.

Gold prices pulled back yesterday as a stronger dollar index limited gains

XAU Curncy Gold Spot Oz 2014 01 08 08 08 38

Confidence in US markets improves as volatility falls

SPX Index SP 500 Index SPVIX 2014 01 08 08 25 57


Events for today: Wednesday, 8 January 2014

CN

Dec

Imports, Exports Trade Balance

0700

DE

Nov

Trade Balance

1100

DE

Nov

Industrial Orders

1315

US

Dec

ADP National employment

1530

US

w/e

EIA Energy Stocks

2000

US

Nov

Consumer Credit

 View Economic Market Calendar

Topics: DJI, SP 500, Gold
More from: Kash Kamal