Markets and Gold

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Wall Street ended a choppy week with a relief rally today after the long-awaited release of government stress test results. In a day in which federal regulators closed four banks, the Dow closed up 119.23 (down 55.04 for the week), the S&P closed up 14.31 (down 3.37 for the week), and the Nasdaq closed up 42.08 (up 21.22 for the week). The question now becomes whether this week’s small decline was due to profit-taking from the last six weeks or whether it is the start of more losses to come. I think that a small decline was a healthy market reaction, especially with the anticipation towards today’s government report, and that today’s buying came as investors breathed a sigh of relief.



Gold advanced approximately 1% today while copper, a barometer of economic growth, advanced approximately 3%. While I feel that talk of a rally in commodities is immature, strength in the metals is an indicator of economic growth, and hence inflation. Keep an eye on the 1000 level for gold (currently the metal is at 914). Even without news favorable to growth and inflation, this level (known as resistance) can act as a magnet, but without good fundamental news to drive the price above, the price will tend to stop at that level. If traders feel that situations for the economy are improving, however, it could drive the price above that level. Just as a magnet pushes a metal away when the metal is on the other side of it, that previous resistance would then become a support, and tend to support the price of the metal (gold) and even accelerate the advance when it goes above it.