S&P 500 Higher on Session, but Gold Breaks $1,250

Equities higher on QE hopes, but gold breaks through $1,250 per toz.

Bullion.Directory precious metals analysis 21 October, 2014
By Christopher Lemieux
Senior FX and Commodities Analyst at FX Analytics

US equities march higher amid QE hopes from the European Central Bank (ECB) and the Chinese GDP “beat,” printing 7.3 percent growth expansion instead of the 7.2 percent economists were expecting.

Although Chinese growth still has a 7-handle on it, this figure is the lowest since 2009. Corporate earnings were a mixed bag. Apple (AAPL) beat on both the bottom and top line, pulling the S&P 500 and NASDAQ up. However, consumer bellwethers, such as Coke (KO) and McDonald’s (MCD) disappoint on the earnings front. Investors punish Coke, pushing it down over six percent. McDonald’s, down roughly .5 percent, seen a quarterly profit decline of 30 percent.

Nine is the new 10. The S&P 500 looked like it was on the verge of a much needed correction, but, after a meager nine-or-so percent decline, stocks seem to no longer look expensive. The equity index gained over 3.5 percent in the last four days, alone. One month for a minor correction, and less than a week to make up half of it. Hopium?

The US dollar is higher on the session, after finding support on the 200-hour exponential moving average; but, price action still remains within a descending triangle where the trend still remains to the downside. Even as the dollar gains some ground off the lows, gold and silver are seeing green.

Silver is above $17.50 per toz., while gold is finding comfort in the $1,247/54 target area outlined here. If gold can close above the 50-day EMA, look for price action to target $1,257/63 zone. At this point, the yellow metal will be challenging the downtrend created in July, as the dollar began to gain steam.

Gold’s movement higher signals that traders (or investors) are still seeking protection and do not have much conviction in the moves higher in the equity markets.

With this much uncertainty, regarding central banking and growth, financial markets are now operating on a day-to-day basis. Gold looks to be well-support above the broken descending channel.

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