Markets decline whilst gold posts positive gains

Uncertainty in the markets dominates Monday’s price action as stock indices fall and gold rallies again after seeing a brief pullback in last week’s trading.

The FTSE 100 has failed to overcome the recent highs and has seen resistance at 5445 yet again. The recent high at 5449 would need to be cleared if the index is to head higher. Monday has already seen a decline of -2.2% for the FTSE whilst the DAX has fallen by -3.1% and is now trading at the psychological 5400 level.

Bank stocks are feeling the brunt of the falls today as Barclays and Royal Bank of Scotland have seen losses of -6% at the start of trading today. With Xtrata shares also down by -6% the heavyweights are pulling the FTSE 100 down heavily. There are still fears that Greece could default on its debt situation and this continues to worry investors with this being a continuous thorn in the side. Until positive sentiment returns into the markets this looks like it will be a tough time for investors to pick up confidence during a time when fears of the global economy plunging into another recession.

Picking up bargains
This could also present buying opportunities for short term traders who thrive on volatility, which has dominated the markets over the last few weeks. September is historically a month where sharp moves are witnessed and so could offer potential opportunities for short term trading. With stocks moving in +/- 5% moves this is a good environment for trading short term setups. As stocks decline longer term investors may look to pick up bargains at lower prices. But this of course would require a strong appetite for risk.

Commodities see strong moves
With investors nervous about the current situation in stock markets the flight to safe havens such as gold has seen the metal trading higher today. With a gain of 0.36% gold is now trading above $1,800 and if momentum remains positive then we could see a push towards $1,835, followed by $1,890 again. Meanwhile oil prices have retreated from $90 per barrel and now back at $86.75 which could see further weakness take oil down to the $83.00 level.

Although fear has crept into the market in Monday’s trading the wide range movements should keep traders alert as many of the indices and commodities are trading at key levels. Sudden movements could create further volatility, which could send indices much lower and at the same time lessening the gap for gold to reach for $2,000 per ounce and even higher.