Gold Enters Dangerous Territory As Oil Skyrockets

Gold has been having a difficult day today as we have just seen gold prices crash to a low of $1160 as of writing this. Gold prices have been under pressure for the past 24 hours as the dollar strength swept in through the markets last evening on closure of the deal in the OPEC meeting. This deal helped to release the pressure on the markets and led to a general risk on mode which helped to boost the dollar. But gold has been affected by an even more important factor today morning as China declared that it would be imposing more curbs on gold imports in order to control capital flight from its shores.

China, along with India, is one of the largest consumers of gold and this declaration by the Chinese government is expected to affect the demand for gold. We are also getting reports that India might also start thinking on similar lines and with its demonetisation policy already affecting the demand for gold, the prices have suffered a double whammy. It is unfortunate for gold investors that all this news comes in at a time when gold prices are already under pressure due to the proposed rate hike from the Fed which the market expects to happen in December. Considering all these factors, we are looking for a bigger correction in gold prices but those who are looking to sell gold should ideally wait for a correction in this downtrend and wait for gold prices to arrive near $1200 before they can jump in with their shorts.

As mentioned in our forecasts yesterday, oil prices have been shooting up since yesterday morning and with the conclusion of the OPEC deal, oil buyers have been given a free hand to push the prices higher and thats what they have been doing today as well as oil prices have pushed through $50 and trading just below $52 as of this writing. We expect oil prices to stall near this level and we are looking for a correction to enter longs.

Unlike gold, silver prices have not fallen hard today and they seem to be undergoing more of consolidation and ranging rather than any specific trend. We believe that silver prices would hold up well compared to gold prices as all the news seem to be directed at gold prices only.