Gold prices are moving higher this morning as the bulls attempt to drive price firmly above the $1100 level. Stock index futures are slightly lower this morning while crude oil is also weaker. The dollar index is trading slightly lower, as well.
Gold has seen some renewed buying interest in recent weeks as global equity markets got off to a very rocky start in 2016. Ongoing concerns over the health of the Chinese economy, as well as lower crude oil prices have taken a toll on investor sentiment. In addition, other geopolitical concerns have also weighed on risk appetite.
There could be more selling to come. Investors are paying very close attention to both Chinese and the crude oil markets. While Chinese stocks have calmed a bit and oil has rebounded back above the $30 per barrel mark, the potential for further volatility remains. Oil could hit $20 per barrel or even lower before the selling has run its course while Chinese stocks could also see additional declines.
On the other hand, a similar scenario to what was seen in August and September cannot be ruled out either. Markets were sold off heavily then on worries over China only to rebound sharply and get back near all-time highs. It would seem, however, that this time around may be different. Markets appear to have several issues to contend with currently, and the bulls may have a much more difficult time turning things around when it comes to risk assets.
This week, investors will get plenty of economic data to chew on. Today will see the release of the latest data on Dallas Fed Manufacturing. The rest of the week will see the latest readings on: S&P CaseShiller Housing Price Index, PMI Services Flash, Consumer Confidence, New Home Sales, Durable Goods Orders, Pending Home Sales Index, GDP, Chicago PMI and Consumer Sentiment. The largest potential data point of the week will likely be Wednesday’s FOMC meeting announcement.
While the Federal funds rate is expected to remain unchanged this week at .25.50 percent, investors will be looking for any clues as to the pace and timing of further rate hikes. Investors may also focus in on the central bank’s language regarding inflation, as a collapse in crude oil prices and a global slowdown have potentially changed the outlook for inflation.
Gold is gaining some technical momentum in the meantime, and higher prices could be seen in the near future.
