Gold Sells Off Amid Increased Investor Risk Appetite

Author: Paul Ploumis
03 Feb 2015 Last updated at 23:21:26 GMT
(Kitco News) - Gold prices ended the U.S. day session moderately lower Tuesday, but up from the daily lows. Better trader and investor risk appetite Tuesday that boosted the world stock markets was a negative for safe-haven gold. However, fully bullish "outside markets"—sharply higher crude oil and a sharply lower U.S. dollar index—did help to lift gold prices up from their daily lows. April Comex gold was last down $12.90 at $1,264.10 an ounce. March Comex silver last traded up $0.144 at $17.395 an ounce.

The gold and silver bulls were disappointed today that the bullish outside markets did not produce any upside price action in the metals. A feature in the market place just recently is the solid rebound in crude oil. Whether this is just an upside technical correction in a strong downtrend in prices, or it is a market bottom, has yet to be determined. However, there are now early technical signals the crude oil market has put in at least a near-term bottom. A close in crude oil prices this Friday that is at or near the weekly high would be a stronger technical clue the market has indeed put in a significant bottom. A bottom in the crude oil market would be overall bullish for gold, silver and most other raw commodity markets. To extrapolate further, a bottom in the crude oil market would be a clue that the U.S. dollar index has limited upside, or has put in a market top, itself.

European stock markets rallied Tuesday on reports the new Greek government will come to terms with the European Union on dealing with Greece's large amount of government debt, and new financing. The reports also said the new Greek prime minister is taking a more conciliatory tone regarding his anti-austerity rhetoric seen just after the election in late January. An EU official said Tuesday there may be some "wiggle room" regarding the EU accommodating Greece's new proposals. The gold market also saw selling pressure on this news. But many market watchers are skeptical of this development, saying "the devil is in the details."

Australia's central bank on Tuesday is the latest to cut its interest rates (to a record low) in an effort to devalue the Australian dollar and in turn try to invigorate the Australian economy. The Aussie dollar fell to a five-year low versus the U.S. dollar on the news. Over a dozen smaller-country central banks have recently lowered their interest rates, as the "currency wars" scenario continues to build. Only the U.S. and the U.K. central banks have interest rate hikes on their radar scopes. And with another OECD world inflation report out Tuesday showing a five-year low rate of around 1% world inflation annually, the U.S. and U.K. may have their rate-raising plans dashed, or at least delayed. Economists and analysts continue to debate the benefits and/or detriments of a stronger U.S. dollar against the other world currencies.

Courtesy: Kitco News