Gold shows its teeth

Frothiness in equity markets may well be helping keep gold’s rise on track.

It has been a confusing start to the year for equity traders as the markets have looked to unwind some of the aggressive rally that indices enjoyed in the last two weeks of the year.

This rebalancing of the books has coincided with a number of the voting Federal Open Market Committee members being given platforms to discuss their hawkish outlooks. Today will see both Richard Fisher and Charles Plosser speaking, and both will be expected to endorse an increase to the current tapering of the US debt purchasing scheme.

Also adding to the confusing picture in the US are last week’s non-farm payroll figures. These had a particularly low turnout and look set to suffer a sizable correction when they are revised later in the month.

As Brenda Kelly has pointed out, from a technical view point gold’s price has now comfortably broken through the 50-day moving average, and the precious metal’s ability to close above $1241 for consecutive days hints towards it heading higher still.

Spot gold chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.