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Back To The Basics: Risk-On Sentiment And High Consumer Confidence

Commentaries & Views

Gold futures are trading under pressure today with the most active December Comex contract currently down $8.80 (-0.72%) and fixed at $1,207 20. After gaining over $20 in value on Friday, gold tracked fractionally higher in trading yesterday. However, closing occurred below a key technical resistance level at $1,217 per ounce. Today gold opened right at resistance at $1,217.70 and traded to an intraday high of $1,220.70 before falling to dramatically lower pricing.

Multiple factors can be seen applying selling pressure to the precious metals complex; these include a U.S. equities markets moving to all-time new record highs (NASDAQ Composite and S&P 500), high consumer confidence, as well as market sentiment looking for at least one more interest rate hike this year.

U.S. equities continue to rage, with the NASDAQ composite reaching 8,000 points for the first time in history yesterday and the Standard & Poor’s 500 also trading to a new record price. Today’s extremely fractional gains in both of those indices moved yesterday’s records into the history book with new all-time highs created today.

Consumer confidence is at its highest level in almost 18 years. Today the U.S. conference board data on the Consumer Confidence Index is coming in well above expectations. The Index increased to 133.4 this month, up from 127.9 in July. According to Lynn Franco, Director of Economic Indicators at The Conference Board, “Overall, these historically high confidence levels should continue to support healthy consumer spending in the near-term.”

Higher U.S. equity prices and consumer confidence clearly illustrate a robust economy in the United States, and this data continues to support a high probability that the Fed will initiate at least one more interest rate hike this year. These factors collectively have put bearish pressure on gold.

On a technical basis, we see real resistance in gold futures at $1,217 per ounce. This is based upon historical data showing solid support at this price point from mid-July until mid-August, when gold pricing broke below that support level trading to a low of $1,167 before recovering.

Our studies also indicate minor technical support for gold pricing at the key psychological level of $1,200 per ounce with critical support at $1,178 per ounce, the 0.78% retracement.

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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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