Gold Prices in Position to Post Another Surge

Despite the surge in U.S. equity markets and a relatively flat U.S. Dollar, April Gold futures finished sharply higher on Monday. Uncertainty over a possible economic slowdown in China and the U.S. are said to be the catalysts behind the rally. Traders are questioning the pace of the recovery due to recent setbacks in manufacturing and housing. According to the latest data from the Commodity Futures Trading Commission, hedge fund and money managers also raised their net long positions in gold futures.

Overnight, gold took out the recent top at $1332.40, making $1307.10 new swing bottom. In addition, the market closed in a position to takeout the key Fibonacci level at $1335.50. Holding this level could lead to a possible move to the late October top at $1361.10.

Demand for higher-risk assets and the return of cold weather to the Midwest and East Coast helped drive up April crude oil prices today. With the dollar hovering near lows, foreign investors are increasing demand for dollar-denominated crude oil. In addition, more cold weather should increase demand for heating oil. This is going to lead to increased demand for crude oil as refineries try to meet the excess usage and while attempting to replenish inventory.

The daily chart indicates that crude oil may be vulnerable to a near-term correction if it can’t sustain a move over $103.00. A break under $101.69 will put the market in a weak position with $100.00 a possible downside target.

A bullish German Ifo business climate report gave the EUR/USD an early boost but the Forex pair could not hold on to gains because of speculative selling pressure. Some counter-trend traders are increasing bets the European Central Bank will lower interest rates again in March in order to stimulus the economy.

Even though business sentiment was up, traders knew the key report to watch was consumer prices. This report showed that prices rose an annual 0.8 percent in January. While this report exceeded the earlier estimate on January 31 of 0.7 percent, it remained well below the ECB’s 2 percent target. Because of this weak figure, speculators are pricing in the possibility of another round of stimulus from the ECB.

The GBP/USD traded mixed on Monday. Like the Euro Zone inflation figure, British Pound investors are also concerned about the U.K. inflation rate. The latest figure triggered the current sell-off from 1.6822, adding support to the Bank of England’s decision to refrain from hiking interest rates sooner than expected.