Gold Chops Around, Likely to Remain Weak

Gold prices bounced off from their lows in the 1275 region during the first half of the day yesterday as the dollar held steady but there was a general dip in the stock markets. The markets seemed to be spooked by the 30th anniversary of the Black Monday, when the stock markets in the US dropped by over 20%. Though what happened 30 years ago is unlikely to have an effect on trading today, the media seemed to like to built it all up and this led to some general fear among the traders and also a general correction in the stock markets. Also, the Chinese GDP came in weaker than expected and this also weighed on the Asian and European markets which helped the gold prices to push higher through the 1280 region.

Gold Moves Lower on Stronger Dollar

But as the day wore on and the US session began, the dollar began to gain in strength and the stock markets also shrugged off their fears and this led to a recovery in the stock markets which placed pressure on the gold prices. Also, the tax reform bill has been passed in the US late yesterday and this proved a huge relief for the dollar bulls who have been encouraged to buy dollars in larger quantities and this has led the gold prices to move lower once again. We have been saying that the stock markets are in a long term cycle of uptrend and that every bounce in gold should be sold into and we have been vindicated once again.

The crude oil prices dropped lower through the $52 region but this drop seemed to be more due to the profit taking from the bulls rather than any major fundamental change. We continue to believe in the overall uptrend in the oil prices and expect it to continue in the short and medium term as well with the target at $55 and beyond. With able support from the oil producing countries, we believe that this target is likely to be achieved sooner rather than later.

Silver prices have also been chopping around, moving higher and then lower, all within a span of 24 hours. The dollar is expected to remain strong during the course of the day today, on the back of the tax reform bill being passed, and this is expected to weigh on the silver prices in the short term.