Gold still on a correctional path
The correction continues to be broadly dominant across commodities and especially for the precious gold and silver. The dollar strength and the rally to records support profit taking for now as investors assess the outlook for the market, the dollar, growth, and metals for new buying prospects!
Gold prices moved lower in Asia this morning down nearly 0.5% to the low of $1531.25 an ounce and recovered to currently trade marginally flat around $1536.61 below the high of $1538.17. As for silver, the metal returned higher and rebounded to trade bullishly around $41.85 off early Asian lows at $40.50 and currently around the highs for the day.
The heavy volatility is evident on metals and the decline was surely to be seen as the rally loses momentum and the correction was needed. The geopolitical changes and the economic conditions across the market have also added to the volatility with the concentration shifting over night from interest rate bets and hawkishness to slowing growth and haven dollar demand.
Metals moved higher as the dollar fell of Asian highs allowing the metals to reverse the losses. The dollar index is trading around 73 areas at this time off highs at 73.29 and marginally around its lows for now.
Silver declined heavily and the profit taking was heavy on the metal, merely inline with its rapid and extensive rally. The CME change of deposit requirements for speculation on the metal extended the profit taking and forced it to drag gold down with it.
Nevertheless, the broad factors still support the upside move for the metals and especially gold with uncertainty, geopolitical tension, debt woes, and growth fears where all combined with a weak dollar which shall keep haven demand on the metal steady. The metal fell about 3.0% from the record set with the start of the week at $1575.62 an ounce reflecting the consolidation of gains for the shiny yellow.
We can see the hawkish sentiment for central banks keeping gold demand as a good haven, where Asian equities declined today on concerns over further Chinese monetary tightening, supporting our argument for the general bullishness for gold.
A strong flow of fundamentals is awaited today starting with the services sector performance from Europe to the US alongside the ADP employment change which will affect the dollar and the market strongly. The volatility might be seen yet we favor the correction for now for the metals to gather the needed bullish momentum to surge higher.