Gold and Oil Analysis: Trading Sideways as Stocks Rise
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Key Takeaways:
- Markets directly affected by stimulus talks updates
- Varying patterns affect different asset classes
- Investors eye more attractive opportunities than gold
The highly volatile market had more surprises to offer on Wednesday as US stocks surged with almost 2% during yesterday’s session amid renewed stimulus hopes.
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Highly Volatile Markets Lead to Surprises
Just the other day the market dropped sharply lower when President Trump announced that congressional Democrats will not be negotiating any stimulus packages until after the election. On Wednesday the picture was quite the opposite as Mr. Trump indicated that he would work for a stimulative bill alongside House Speaker Nancy Pelosi.
That alone was enough to bring back the momentum in the US stock market as the DJIA closed 1.91% higher, up 530 points. The S&P is up 58 points or 1.74% and the Nasdaq is up 210 points or 1.88%. Futures also indicate a climb at the open as indices are up 0.5% in the premarket.
Stimulus Talks Influence the Markets
With stimulus hopes back on the menu, optimism arguably returned to the financial markets. However, the rising tide did not lift all boats this time as not every asset class saw increased buying momentum. Gold and oil were found to be lagging as the precious metal was up only $8 while oil was up $0.28.
Yesterday’s session saw gold open at $1,878 and close at $1,886. Today the situation is pretty much unchanged as gold is trading at $1,891. Oil, on a similar note, was also relatively unaffected by the buying wave as it opened yesterday’s session at $41.90 and closed at $42.18.
Fundamentally, oil has strong reasons to appreciate in value given that a stimulus deal will help drive demand higher as people will spend more to use more gasoline and oil-related products. Gold is also currently seen as somewhat neglected, which could be interpreted as a result of investors flocking to more attractive opportunities in the stock market. Gold usually trades on the defensive side when stocks rise as it acts as a safe haven, an asset preferred in times of uncertainty and global economic weakness.
Current developments lead us to the conclusion that the dormant prices of gold and oil may serve as indicators of a rising stock market, but traders and investors need to be vigilant now more than ever. Indeed, circumstances may change overnight as we have been witnessing this week.