Futures up, gold hits 8 year high as ASX readies for fourth consecutive day of gains

After a rollercoaster day in which the S&P/ASX 200 index (XJO) fell below 5900 points, there was a recovery of sorts as the index finished up nine points.

The materials sector helped to provide forward momentum with Western Areas (ASX:WSA) surging 16% on the back of a significant nickel/copper strike at its Sahara prospect, part of the Western Gawler Project in South Australia.

With positive leads coming from all key overseas markets, one would expect the ASX to continue making ground on Wednesday, but the SPI200 futures index is only up nine points to 5934 points.

However, on the domestic front confidence could be dented by the resurgence in coronavirus cases, and this may account for futures markets reflecting only a slight gain.

24 hours

Other markets in the Asia-Pacific region performed more strongly than the ASX yesterday with the Nikkei 225 gaining 0.5% or 111 points to close at 22,549 points.

The Hang Seng outshone other indices in the broader region, gaining nearly 400 points or 1.6% to close at 24,907 points.

The Shanghai Composite was up marginally, closing at 2970 points.

While positive sentiment prevailed in the UK, mainland European bourses were even stronger.

In the UK, the FTSE 100 gained 1.2% or 75 points to close at 6320 points.

In Germany, the DAX surged 260 points or 2.1% to 12,523 points after being up about 350 points in mid-session trading.

The index has now gained nearly 50% in the last three months, and while slightly off the early June high (12,847 points) it is pushing up towards pre-coronavirus levels.

Across the border, the CAC 40 gained 1.4% or 69 points to close at 5017 points.

In the US, it was the NASDAQ that once again led the way, consolidating above the 10,000 point mark at 10,131 after hitting a high of 10,221 points.

The Dow gained 0.5% or 131 points to close at 26,156 points, while the S&P 500 increased 0.4% to close at 3131 points.

In the midst of all this positive sentiment it wouldn’t have been surprising to see gold take a breather, but it continued on its winning ways, gaining 1% to US$1783 per ounce, close to its 52 week high of $1788 per ounce, and importantly, recording the highest closing price since October 2012.

Strength in the precious metal is being attributed to weakness in the US dollar which could well be exacerbated by continued central bank stimulus packages in response to the economic impact of coronavirus.

The Brent Crude Oil Continuous Contract fell 0.4% to US$42.54 per barrel.

Iron ore continued to lose ground and has now returned to the US$100 per tonne mark.

There was little movement in copper and nickel, but lead continued its three day retracement, falling below the psychological US$0.80 per pound mark after a strong five-week performance.

As is often the case, zinc mirrored the decline in the lead price, pulling back to US$0.92 per pound after hitting a four-month high of just over US$0.94 per pound.

The Australian dollar is fetching US$0.69.

Australian gold miners will be paying close attention to the AUD:USD fluctuations — the implied Australian dollar gold price at current rates is approximately $2575 per ounce.

Consequently, our market could receive support from investors targeting local gold producers which at that price would be clearing approximately $1300 per ounce based on average production costs.