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Gold and silver rallied hard overnight

Five markets in focus today: Spot Gold, GBP/JPY, Brent Crude, New York Cocoa and Beadell Resources.

Gold
Source: Bloomberg

Spot Gold

Gold and silver were the big movers overnight, with big volumes going through the futures market. Clearly the Fed meeting has encouraged traders to close trades put in place in anticipation of a more hawkish Fed, and with the Fed failing to acknowledge the pick-up in inflation, gold bulls have put money to work. Spot gold has breezed through the April downtrend, 55-, 100- and 200-day moving averages and also the $1300 level as well. The April 14 high of $1331 is the next target. Pullbacks to $1302.5 look like potential buying opportunities at present. Silver as well looks strong and has broken the February 24 downtrend.

GBP/JPY

There’s a lot to like about sterling at present, especially for traders and investors who like to play central bank divergence (in terms of their policy stance). The BoE has hinted that it may raise its cash rate this year (I am looking for a hike in November), however if you look at the markets this is now priced in and we will need fresh data to see more aggressive market pricing. Still, I feel the fact that we haven’t seen any major disappointment expressed in sterling on the lack of dissent at the recent BoE or weaker CPI print is very interesting, and thus GBP/JPY could push higher from here. The break of horizontal resistance (drawn from the January 23 high) suggests the pair can test the years high at 174.84 in the short-term and I would potentially look for as move to 176.50 over the medium-term, with a potential stop on longs at 172.50.

Brent Crude

Despite the Iraqi army regaining control of the Jaidi refinery in Northern Iraq, traders continued to bid up Brent crude. There has been some selling coming into the market, with the August contract hitting a high of $115.71 and pulling back to the figure. On the daily chart Brent is overbought, with the 9-day RSI at 84, however news out of Iraq is fluid and it’s hard to see a collapse in prices anytime soon. Traders continue to play the Brent/WTI spread (by being long Brent, short WTI) and thus this spread has blown out 74% since June 10.

New York Cocoa

For traders who follow trends, cocoa is on fire right now, hitting a three year high overnight. There have been new processing facilities in India and China, which has added to the demand equation, with demand for cocoa in Asia picking up 29% over the past five year. Technically price is rising within a bullish channel which suggests higher levels, however stochastics are now at extreme levels. Interestingly, the RSI’s are not overbought.

Beadell Resources (BDR)

BDR was the best performing stock on the market yesterday and given the moves in gold overnight it should see good follow through buying on open. A break of downtrend resistance (63 cents) could see a quick move to 70c.

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