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Alert-16:05 ACM Precious Metals Analysis: Gold Surges Taking a New Stance with Risk Aversion
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Gold struggled to gain upside momentum in the early part of the session, but buyers were able to turn the corner once the price broke above $885oz. Equity markets were positive earlier, but suffered a sharp drop as the day progressed brining the Dow down nearly 175pts. The role is gold is playing in the risk aversion theme is a designated safe-haven asset, meaning that price may move in favor with dollar strength trumping the inflationary hedge theory. The correlation between the Sterling and gold has been moderately growing over the last several days at 0.63. The BoE announced a series of further actions that exclude additional quantitative easing and focus on other tools. They are developing an asset purchase program that will act as a buying facility for some of the higher quality illiquid products owned by financially burdened institutions. The market received the BoE plans well, and the cable was lifted. Most of these plans by the UK will be financed through a 3M T-Bill auction rather than Gilts. Some investors probably decided to reallocate some capital back into gold to serve as a hedge on heightened volatility in equity and interest rate markets.
Support: 885.14 Current: 907.40 Resistance: 919.31
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