Market Overview :
This week began strong for commodities after last week selloff. Gold rallied Monday to new highs despite a stronger dollar, this is a major win for Gold as the long time correlation between gold and the USD seems to have finally been broken. It is hard to forecast where the gold market rally will end as gold is already in its all time high's and it seems it continues to break its previous highs every new week. On the U.S. front we had 3 days of a pretty strong selloff in the markets as both the DJ 30 and S&P 500 (both instruments are traded on our platform) lost some major ground but still managed to close up for the week. What traders should be really looking at right now is the volume on those last three trading days, which was a lot below average. When the market volume is low it shows us how uncertain traders are with the current market conditions and it seems all bets are off the table until the end of the holidays coming up this week.
The main instruments to follow this week:
The dollar-stocks inverse trade has been in full force all week. USD up, stocks, commodity currencies, oil...... you name it..... It was probably down. This will be a interesting week for the USD as a lot of financial information accompanied by low volume might cause more volatility than we are used to seeing in the markets.
The pair is likely to test the 1.500 resistance once again, this is not going to be a technical driven week but more of a fundamental driven week, so pay more attention to the macro data as we have a lot of it coming this week.
We have a holiday in Japan today so most of the financial institutions are closed, expect very small volume in JPY pares that may lead to big swings and volatility. Bad news from the U.S. should continue to benefit the JPY.
India's acquisition of 200 tons of bullion from the IMF boosted interest in gold earlier this month. The impetus from the move pushed gold through key technical resistance levels, taking gold to a record $1,152.75 an ounce on Wednesday
Bullion, or in its more common name gold, has seen strong support from renewed central bank interest, buying by prominent hedge fund managers including John Paulson, and signs of simmering inflation. I believe People want to buy gold on breaks. Gold will hold its stability relative to other asset classes as long as there are economic uncertainty and potential for inflation going forward - both are not going to subside in the near term.
This is a short term trade in gold; I would want to buy when gold breaks its previous high and sell it after 10 or 15 points of gain. Gold has been acting this way for a while; it breaks up makes a new high 10-15 point above the previous high, than consolidates around that number.