Gold Prices Moving Higher as Equities Continue to Fall

(CEP News) - The risk aversion trade is once again affecting markets. Investors are jumping away from equity markets and into “safe haven” like the U.S. Treasuries and Gold.

After a brief selloff, gold prices are once well supportive are trading near the weekly highs. Prices were trading fairly steady in the overnight session, however another aggressive sell off in equities has pushed gold to session highs at $929.50.

Markets are ignoring North American data and focusing more on what is happening in China. Gold prices tumbled to near monthly lows on Wednesday in anticipation that the Chinese government would announce more stimulus spending.

However markets were disappointed. In the Asian session, Chinese Premier Wen Jiabao spoke on the economy and made no mention of further stimulus plans, but pledged to deliver an 8% GDP growth rate in 2009.

Mike Glaser, futures broker at LaSalle Futures said the gold markets will continue to look strong was equities continue to fall.

“People are trying to form a technical double bottom in equities but I just don’t think you can stop the inventible,” he said. “I think we could see the S&P fall to 650 and I think gold will move higher.”

Glaser said his short term target is for price to hit about $950.

Although gold price continue to move higher, Jon Nadler, investment and products analyst at Kitco said there is still a danger that prices could fall below $900. That fear along coupled with a growing scrap gold market could keep prices under pressure.

“Actually, there is a serious internecine war in the making in the gold market; investors versus grandma’s bedroom drawer contents. And, no doubt, one side is sitting on most of the ammo. Guess which one. Bears watching on a daily basis,” he said in a research note.

WTI Crude oil is down $1.61 to $43.77 while ICE crude oil is trading down $2.19 to $43.93.

Meanwhile, ICE RBOB gasoline futures are up $6.22 to $138.16 and Globex natural gas is down $0.01 to $1.25. Heating oil at the ICE is up $3.49 to $121.45.

In the mining sector, spot gold is trading up $23.20 to $929.70 USD. In Canadian dollars, gold is up $45.30 to C$1199.24. Silver contracts at the CBOT are up $0.29 to $13.21.

Bloomberg’s index for base metals is down 2.54 points to 114.05. Wheat futures at the CBOT are down $8.00 to $515.00.

All data taken at 2:22 p.m. EST

By Neils Christensen, neilsc@economicnews.ca

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Posted in Categories: Canada, Commodities, Economy, Eurozone, Releases, USA.

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