Gold Thanks The Fed
June gold
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bet that lower interest rates will stimulate physical demand for the metal.
Yesterday the Fed cut interest rates by a widely expected .50%.
Lower interest rates also make European debt instruments
relatively more attractive. Despite the European Central Bank’s surprise .25%
rate cut last week, the ECB is not expected to cut rates again soon. This means
traders will sell dollars to buy Euroland debt instruments.
June dollar index futures
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Cheaper dollars are another potential positive for gold.
Gold is dollar-denominated so declines in the dollar often spur rallies in gold
as demand increases when the metal becomes relatively cheap (cheaper dollars).
Gold is on the Momentum-5
List and triggered a Pullback From Highs
setup, a situation pointed out in yesterday’s Futures Market Recap.Â
Yesterday’s API showed
inventories of gasoline increased during the past week to just 1% below levels
from the previous year. The market is viewing the news as bearish, despite
cleaner-burning reformulated unleaded gasoline inventories falling from last
week. This is the fourth consecutive down day and fills the April 9 gap.
Unleaded should find support at its current level, in the .9600 area as this
coincides with the 50-day moving average.Â
Stock index futures are
rallying in delayed response to the Fed’s rate cut. Microsoft
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is playing a big role here. The stock’s weighting on the Nasdaq 100
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has risen to 10.27% and on the Nasdaq Composite to 10%. With this heavy stance,
a move up in this stock alone can get the entire tech sector to rally. An
outside bar in MSFT triggered a Pullback From Highs setup and is constructive.
Softie is up 1.35 at 69.65.
Rallies in Merck
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are leading the Dow and kicked the cash index above 11,000 for the first time in
three months.
Dow futures
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List and stock indexes hinted they could make a larger-than-normal move as
all three posted on the Multiple Days Low
Volatility List.