Gold Higher After Safe Haven Demand and Short Covering Action

Gold prices are modestly higher and trading near Monday’s three-week high in early dealings Tuesday. Some more safe-haven buying and short covering in the futures market are featured, following decent gains posted Monday. Unrest in the Middle East and weak Chinese economic data released Monday are working in favor of the yellow metal. February Comex gold was last up $4.70 at $1,079.90 an ounce. March Comex silver was last up $0.174 at $14.015 an ounce.

There is still some anxiety in the marketplace Tuesday, but not as much as Monday. China’s central bank on Tuesday injected 130 billion yuan in short-term funds into its banking system and also intervened in the foreign exchange market to support the yuan. This helped to somewhat stabilize Asian stock markets following Monday’s strong selling pressure. Still, Chinese and world stock indexes were feeling a bit more selling pressure Tuesday.

What has been a surprising development this week is the inability of crude oil prices to rally in the face of significantly heightened tensions in the Middle East. In recent years, such developments would have quickly popped the price of crude oil by at least several dollars a barrel. However, this week the worries about a worldwide oil glut and slowing worldwide economic growth (meaning less demand for oil) are trumping the Middle East friction to keep oil prices from rallying. It’s somewhat ironical that crude oil prices seeing some selling pressure Monday also helped to pressure the U.S. stock market.

In other overnight news, inflation in the Euro zone remains stubbornly low. The European Union statistics agency on Tuesday reported consumer prices in December were up 0.2%, year-on-year. A rise of 0.3% was forecast. The European Central Bank wants to see an annual inflation rate of 2.0%.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the ISM New York report on business, and domestic auto industry sales.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza