The gold market is moving higher on the first day of trade in the New Year as stocks get pounded once again. The gold market is looking increasingly bullish from both a fundamental and technical perspective and the market could continue its current uptrend until proven otherwise. A variety of factors could be behind the market’s ascent, with worries over a global slowdown taking center stage. Concerns over rising interest rates, the ongoing trade war, the partial government shutdown and some weakness in domestic data are all likely playing a part.
What’s Fueling Stock Selling Today?
The stock market is not getting the New Year off to a great start, and in fact, looks poised to continue its recent declines. The Dow Jones Industrial Average is off some 300 points in early action today as further concerns over China’s economy weigh on sentiment.
Overnight, the latest reading of the Caixin manufacturing index fell to 49.7. Readings under 50 signal deteriorating conditions and the latest reading was the first showing contraction in a year-and-a-half. The weaker manufacturing data lends further credibility to the notion of a slowing Chinese economy. The slide seen in manufacturing in the second half of the year could also point to a much more significant decline in demand and the economic picture in China could be even more serious than the data suggests.
Worries over the health of the Chinese economy have been a major factor in recent market declines and rising volatility. As the world’s second-largest economy, any weakness in China has the potential to spill-over into other global markets and could fuel significant risk aversion in the process.
The gold market is on the offensive again today and has scored a fresh 6-month high in price. In recent action, gold is up $8.33 per-ounce at $1286.63. The yellow metal has been gaining ground in recent sessions after clearing previous resistance around the October highs in the $1252 region.
The market is now setting its sights on the psychologically important $1,300 area. The gold market has moved above the key 200-day moving average for the first time since last May, and prices have been trending higher for the last several weeks now.
The market’s current technical posture would seem to strongly suggest that more upside may be seen in the days and weeks ahead. Any significant dips in the market are likely to be aggressively bought at this point. An upside breach of resistance around the $1,300 area could set the stage for even higher prices as more momentum traders get involved and as the FOMO (Fear of Missing Out) effect takes hold.