(Kitco News) - Market volatility giveth and market volatility taketh away according to some market participants as they watch gold prices push to session highs and equity markets give up more than half their gains from Wednesday’s historic rally.
The gold market appears to be one of the biggest beneficiaries as U.S. equity markets fall nearly 2% across the board. The day after the Dow Jones Industrial average rallied 1,000 points, its biggest one-day points gains in history.
February gold futures last traded at $1,279.20 an ounce, up 0.49%. After underperforming the entire precious metals sector, silver is also starting to attract some investor attention. March silver futures last traded at $15.30 an ounce, up more than 1% on the day.
“Gold is rallying as a function of growing market volatility,” said Colin Cieszynski, chief market strategist, SIA Wealth Management. “Investors right now are looking for protection from growing market uncertainty.”
Ahead of Thursday’s selling pressure, many market analysts were warning investors that Wednesday’s rally was unsustainable as volume was extremely low.
Hussein Sayed, Chief Market Strategist at FXTM, said that along with holiday trading volume, it’s not uncommon to see these types of rallies as markets enter a downtrend.
“It’s still too early to conclude whether the market correction is over or more downside is yet to come,” he said. “To call for a bottom, we need at least a couple of days of strength, not just in price, but also in trading volume, breadth of the market, and fundamentally supported environment. So far, we don’t see a shift in fundamentals.”
Along with market conditions, the latest economic news is also weighing investor sentiment. At the start of the session the U.S. Conference Board, said that is Consumer Confidence Index increased to a reading of 128.1 down from November's multi-year high at 135.7. The data was weaker than expected as economists were calling for a reading of 133.7.
According to the report, U.S. consumers are becoming more concerned about future economic growth. The Expectations Index dropped sharply in December to 99.1, down from November’s reading of 112.3.
While financial market uncertainty will continue to support gold prices, Cieszynski, said that he doesn’t see prices pushing above $1,300 an ounce before the end of the year.
“That is probably a good thing if gold prices don’t go through $1,300 as the market will probably give back those gains in the new year,” he said.
Bill Baruch, president of Blue Line Futures, continues to be bullish on gold as he sees any pullback as a buying opportunity ahead of the new year.
“Gold is our strongest conviction, we have been unequivocally bullish in bias for months. If you bought gold on December 23rd and have held through January 11th, you have made money 14 out of the last 16 years and have averaged a gain of about $30,” Baruch said in his daily commentary to clients.
