Gold Sees Short-Covering Bounce, Bargain Hunting
New York (Aug 26) Gold prices are moderately higher in early U.S. trading Tuesday, on some bargain hunting and short covering following recent selling pressure. December Comex gold was last up $9.70 at $1,288.50 an ounce. Spot gold was last quoted up $11.00 at $1,287.75. December Comex silver last traded up $0.199 at $19.63 an ounce.
The market place was quieter overnight and could remain subdued the rest of this week, ahead of the unofficial end of summer that comes with the approaching U.S. Labor Day holiday weekend.
One underlying theme early this week is the rallying U.S. dollar index and slumping Euro currency. The comments from European Central Bank president Mario Draghi late last week in Jackson Hole, Wyoming, are concerning to many market watchers. Draghi strongly hinted the ECB is set to implement more monetary stimulus measures to prop up the flagging European Union economy—and to ward off the threat of deflation in the bloc. The state of the EU’s economy is prompting some increased demand for safe-haven assets. German bonds are hovering near record-low yields, while U.S. Treasury yields have also dropped significantly recently. Safe-haven gold is also seeing a good bounce Tuesday morning. With this increasingly interconnected world, it’s hard to imagine other major world economies being healthy when the European Union’s is so sickly. This notion is a underlying bullish factor for gold.
The other theme in the market place is new record highs, or multi-year highs, in the major U.S. stock indexes this week. It’s been a “perfect storm” for the U.S. stock market recently: U.S. economic growth that’s not too hot and not too cold; an economy that’s still awash in cash from years of easy money policy from the Federal Reserve; and very low inflation that makes returns from the stock market look better than other asset classes. However, there are a few early clues this perfect storm for the equities market is ending. One is the U.S. Fed has hinted just recently it will move sooner rather than later to raise interest rates if the U.S. economy continues to show improvement.
U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, durable goods orders, the S&P-Case/Shiller home price index, the monthly house price index, the Richmond Fed business survey, and the consumer confidence index.