Gold Bounces Off Support

After some early losses, the Dow Jones and S&P 500 managed to recover most of those losses although they both still closed down slightly. The General Electric (GE) share price continued its decline, falling another 5.9% overnight to reach a six-year low. The decline comes on the back of the dividend cut and restructuring announced two days ago.

Gold prices bounced off a support level to close back above $1,280. The declines from September appear to have been halted with price action beginning to look more bullish. Volatility in gold has been trending down over the last year following from a spike that occurred at the time of the US election. Priced in Australia dollars, gold is actually back at multi-month highs as a result of the weak Australian dollar. In fact, the AUD is now back down to US$0.763, which is the low since late June and is in a clear downtrend at present.

ASX 200 futures are down 30 points this morning, indicating a weaker open for the index. Chinese industrial production and retail sales data released yesterday was weaker than expected and has hit base metals prices such as nickel, copper and aluminium. As a result, weaker opens are expected for BHP Billiton (BHP) and Rio Tinto (RIO). A fall in oil prices may also hit the oil producers as the Energy SPDR EFT was down 1.6% overnight. Part of the reason for the oil weakness was an International Energy Agency (IEA) report that downgraded its prior forecasts for oil demand growth while also predicting that US oil output would rise faster than any country in history over the next several years.

Data Releases:

–    Australia Wage Price Index 11:30am AEDT

–    UK Unemployment Rate 8:30pm AEDT

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This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.