Gold prices about to take off
Gold has been one of the best performers of the day with the price of the yellow metal skyrocketing past through resistance levels around $1200 and $1207 to finish the day almost touching $1220.
Prices of gold have long been discounting that the Federal Reserve might raise rates this year and as the markets starts doubting these prospects investors are looking for alternative assets to the U.S. dollar.
The latest batch of economic data from the U.S. has been released today and the picture does not look rosy at all. Retail sales figures have come out unchanged in April, while the core number excluding food and energy was reported barely in positive territory at +0.1%. Traders began buying gold.
The report indicated that the demand slowdown which we have seen in the first quarter is still persisting and the argument that weather affected spending is rapidly losing credibility. With a decline in import prices for the month of April totaling -0.3%, the factors weighing on the U.S. dollar consolidated.
The decline in import prices has been supported by a relatively stronger dollar. But the main beneficiary in Wednesday trading was the yellow metal. As gold steamrolled through resistance levels around 1200 and 1207, stops were triggered prompting a move higher towards 1218.
The rally has paused here and the price pulled back to consolidate. This is what we are looking for as traders - more consolidation before another leg higher. Volatility is on the rise, so in order to take a good gold position we will wait for prices to pull back towards 1207 to buy daily calls.