Gold Is Resilient: Prices Hit Session Highs Following Sharp Selloff
(Kitco News)- Gold investors should feel a little more confident as theyellow metal has proven resilient following a sharp selloff after U.S.inflation data shocked financial markets.
Wednesday morning has been volatile for the gold market,which is just off session highs, recovering from a $14 drop following mixedU.S. economic data from January; the Consumer Price Index showed inflation washotter than expected but retail sales were weaker than expected.
April gold futures last traded at $1,345.60 an ounce, upmore than 1% on the day. The gold market has been able to withstand higher 10-year bond yields, which continue to trade at a four-year high at 2.875%.
“While markets initially focused on inflation data, tradersare starting to realize that because of the disappointing retail sales, nothinghas changed,” said David Madden, market analyst at CMC Markets.
Madden added that gold is also benefiting from sober secondthought on inflation. While the month-over-month change wasstronger-than-expected, annual inflation was unchanged at 2.1%. Annual coreinflation was also stable at 1.8% annually.
“Overall, inflation isn’t heading up, it's holding steadyand I think it took time for markets to realize that,” said Madden.
Phillip Streible, senior market analyst at RJO Futures, saidthat gold suffered from indiscriminate selling following the data. However, headded that the market is benefiting from safe-haven flows because of the mixedeconomic signals.
Streible added that gold is benefiting from a strugglingU.S. dollar.
“The U.S. Dollar Index is struggling to hold gains above 90-- that is proving to be a strong resistance point -- and that is good forgold,” he said.
Jim Wyckoff, senior market analyst at Kitco.com said thatgold is benefiting from technical momentum as increased volatility has added togold’s safe-haven luster.
As gold prices have pushed above critical resistance at$1,334 an ounce, both Streible and Madden said that gold has the momentum tomove higher. Both analysts are looking for the yellow metal to push above$1,350 an ounce eventually.
“If we get above $1,350 then we are going to test newhighs,” said Streible. “You shouldn’t ignore how resilient gold has beenlately.”
By Neils ChristensenFor Kitco News
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