Gold Sinks to 5.5-Year Low Amid Rallying Stock Markets, Strong U.S. Dollar

By Paul Ploumis (ScrapMonster Author)

November 18, 2015 01:20:37 PM

Gold prices dropped to a 5.5 year low Tuesday. The recent rally in US dollar index has worked against the precious metal.Gold Sinks to 5.5-Year Low Amid Rallying Stock Markets, Strong U.S. Dollar

(Kitco News) - Gold prices dropped to a 5.5-year low Tuesday, pressured in part by rallying U.S. and world stock markets early this week. Traders and investors have reckoned the terror attacks in Paris are not going to influence their trading decisions--at least not at this time. The "risk-on" mentality in the market place Tuesday was bearish for the safe-haven gold market, as monies flowed into the competing asset class: equities. The other bearish element working against the precious metals recently is the rally in the U.S. dollar index, which on Tuesday hit a seven-month high. February Comex gold was last down $14.30 at $1,069.80 an ounce. March Comex silver was last down $0.072 at $14.18 an ounce.

Importantly, the drop to a new multi-year low in the gold market Tuesday has produced significant longer-term technical damage. Now the door is opened to a challenge of major psychological support at $1,000.00 an ounce in the coming weeks or few months.

U.S. economic data released Tuesday was a mixed bag. The October consumer price index was up 0.2%, which was in line with expectations. Meantime, industrial production in October came in at down 0.2%, which was weaker than expectations. Capacity utilization in October was 77.5%--unchanged from September and in line with expectations. None of this data had a significant impact on markets prices.

World stock markets were also mostly higher Tuesday. Asian stock markets followed the U.S. stock market rally Monday. European stocks were higher, too, and helped by notions the European Central Bank will initiate fresh monetary policy stimulus soon. A European Central Bank official said Tuesday the Paris terror attacks will likely negatively impact the Euro zone economy.

The closely watched German ZEW economic expectations index was released Tuesday and came in at 10.4 in November versus 1.9 in October. The number was also well above market expectations.

A major theme in the marketplace continues to be the slumping raw commodity sector. Copper prices hit another six-year low Tuesday. The red industrial metal’s price is a good gauge of the pace of overall world construction. Many other raw commodity prices are at or near multi-year lows. Sector leader Nymex crude oil prices are hovering just above $40.00 a barrel, with many oil market watchers now saying crude will likely slip back below the $40.00 mark. Crude oil will very likely have to lead a recovery in the raw commodity sector’s bust cycle.

Courtesy: Kitco News