Markets take a pause after recent rally

Friday, December 19, 2014

European equity indices took a brief pause at the end of the week, with most major benchmarks across the region paring some of the week’s substantial gains, as investors took an opportunity to take profits ahead of Christmas and during the last full week of the year. In what marks the last full week to the year, European shares remain on track to post their best weekly performance for 2014, as risk appetite improved significantly after policymakers at the US Fed outlined that there was no rush to raise interest rates and that the economic turmoil in Russia would unlikely lead to an increased risk of contagion, going as far to say that lower oil prices were advantageous to the global growth outlook.

Spot gold prices remained underpinned below $1,200/oz today despite attempts earlier on to breach resistance at the 50 day MA. The yellow metal has lost 2% this week, erasing much of the previous week’s gains as investment demand shifts to higher yielding assets. After peaking towards $1,240/oz earlier this month, gold prices have been heading steadily lower as investor confidence returns and central bankers offer further clarity for the path of an eventual interest rate rise. Recent strength in the dollar index has also exerted considerable downward pressure on gold prices, with the index on track to post gains for the third straight session after testing levels towards 89.463 early on.

Recent comments by central bankers around the world have hinted at a continued flow of cheap liquidity next year which could see gold prices extend declines. The Bank of Japan announced overnight during its last policy committee that it would reaffirm its commitment for further stimulus by buying up government bonds, which eased concerns of further market turbulence among investors.

Despite the positive tones resonating across equity markets, the euro traded under continued pressure today as the single currency fell back towards a 28 month low, trading towards 1.2253, as the ECB moved further towards switching on the presses and printing euros to purchase government bonds in a bid to boost growth in the region. At the time of writing, US futures were trading cautiously higher with investors in both the S&P 500 and DJIA taking a breather after the two day rally on Wednesday and Thursday this week which saw the S&P 500 rally 4.5% and the DJIA add 4.1%.

Gold prices come under pressure, holding below $1,200/oz

XAU Curncy Gold Spot Oz 2014 12 19 15 27 16

DJIA pauses after recent rally

DJI Index Dow Jones Industrial 2014 12 19 15 22 07

Topics: Gold, Crude oil, EUR, DXY
More from: Kash Kamal