The gold market is having a banner day thus far, moving sharply higher on the back of a weaker greenback. The gold market is once again knocking on the door of key resistance around the $1,300 area and could potentially see a significant upside breakout ahead.
What’s Behind Higher Gold Today?
The gold market is getting a lift from several factors today. Bargain hunting and technical buying are being seen in the marketplace as the metal recovers from recent selling pressure. The dollar index may be the primary catalyst for stronger gold today, however. The greenback is under solid selling pressure today as the index retreats below the $96 level.
The dollar is likely being affected on several fronts. The ongoing U.S. Government shutdown may be playing a role. More analysts have recently sounded the alarm bells about the negative effects on GDP that may be seen if the shutdown goes on much longer. The shutdown is also happening at a time when the U.S. economy is already showing some signs of weakness. China’s economy is also under pressure, as the world’s second-largest economy recently posted its worst growth rate since 1990.
The combination of slower global growth and the shutdown may be driving selling pressure in the dollar as investors get ready for next week’s Fed meeting. The central bank has recently taken a decidedly more-dovish tone in its commentary and could potentially rethink its plans for rate hikes going forward.
Market Reaction
Gold prices are up by $18.29 per-ounce at $1297.39 in early afternoon trade. The market appears to be readying for another run above key resistance around the $1,300 region and an improving technical posture and strong weekly close may attract further buying interest next week.
The recent dip in gold prices was once again taken advantage of, and the market will likely remain in “buy the dips” mode until proven otherwise. A breakout of near- resistance could potentially set the stage for a significant run higher, as the market has been building a base for some time now.
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