Gold: Rising from the ashes
After the Fed pressing the nuclear button yesterday to backstop the US economy and stall dollar funding pressures, gold rose sharply as investors turned towards the commodity in anticipation of dollar weakness amid the Fed announcement.
Gold climbed back above its 100 and 200-day moving averages, solidifying a more bullish bias in a move well above the $1,500 level and looking towards $1,600 next.
As the Fed throws the kitchen sink at the problem, the hope for gold is that this will help to alleviate dollar funding pressures just enough to keep the greenback from being bid but not enough to help the US and world economy turn the corner.
As such, the low rates, low yields, softer dollar environment will start to look like the perfect storm for gold. And now, even the technical picture is starting to line up.
The key question though is can the Fed's latest measures really do the job to quell worries in the market and flows in the dollar for a sustainable period of time.
For now, that looks to be the case as gold starts to rise from the ashes. A break of $1,600 will look even better for gold on the way up to test the $1,700 level again. But just be mindful, that sudden financial dislocations and forced deleveraging could easily see the dollar make a comeback and shoot down the golden phoenix.