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Market update: Gold breaks out and Dow hits new high

Fawad Razaqzada Fawad Razaqzada 06/05/2021
Market update: Gold breaks out and Dow hits new high Market update: Gold breaks out and Dow hits new high
Market update: Gold breaks out and Dow hits new high Fawad Razaqzada
  • Gold and silver break out as commodities continue upsurge
  • Dollar extends decline against commodity dollars
  • Fed reassurance sends commodities and stocks highs, yields low
  • Tech stocks could be in for a comeback
 
The markets have been quite volatile today. We saw big moves in precious metals as they broke out of their recent ranges, thanks to a weaker US dollar, which extended its decline against commodity dollars. Commodity dollars have been rising sharply owning to the gains in underlying prices of commodities, all due to expectations for a strong global economic recovery from the pandemic. As well as gold and silver, most other commodities also continued their recent upsurge, including lumber, coffee, corn, wheat, soyabean and cotton.

Fed reassurance sends commodities and stocks higher, yields lower

Supporting gold and silver further was the drop in government bond yields. After Janet Yellen, the former Fed chair and the current Secretary of the Treasury, inadvertently caused a bit of panic by her comments regarding tightening of monetary policy a couple of days ago, we have seen a chorus of Fed speakers come out to reassure the market that QE will not be tapered any time soon.  they are not even considering tapering any time soon. Kaplan aside, Rosengren, Clarida, Mester, Evans, Williams and Kashkari have all come out to reaffirm the Fed’s current policy stance. This is exactly what the stock market bulls would have liked to hear and we have consequently seen growth stocks leap higher, sending the Dow to repeated new all-time highs.
 
Tech stocks set for comeback?

With sentiment towards the equity markets remaining positive, yields falling, and zero-yielding gold and silver rising, we could see technology stocks make a comeback. In the last few days, the Nasdaq has been falling sharply while the Dow has hit new records. There has been rotation into value stocks. But now we could see the tech sector make a comeback.   
 
Gold breaks outs

Now I mentioned gold above and looking at the chart, the bulls seem to have regained full control of price action once again:

GoldSource: ThinkMarkets and TradingView.com

After the metal found strong support on two separate occasions in March around the $1675-$1700 area, prices went into a period of consolidation after taking out resistance at $1765. But now they have broken further higher, taking out the next resistance at $1800 today. This level is now going to be the most important support to watch. Dips back into $1800 could be defended by the bulls, leading to a potential move higher towards the levels shown on the chart, including around $1850 where the 200-day average and a bearish trend line converge.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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