Gold prices are flat to slightly lower here in early trade Monday to kick off the new trading week. The gold market is not seeing much buying interest to begin what will be a busy week from a data perspective.
Over the weekend, the results of the EU bank stress tests were released. According to the European Banking Authority (EBA), 24 Euro zone banks failed the so-called stress tests and will need to get their financial houses in order within nine months or be shutdown. While the fact that any banks failed the stress tests is not a positive, the results did not seem to point to any type of problem that could threaten the EU financial system. A collective sigh of relief was likely indulged in by officials following the release and it seems that now the EU can continue to focus its attention on helping get its economy back on track.
That being said, investors may be watching later this morning as data on the ECB’s bond buying will be released. The data will show what the bank spent last week on covered bond purchases after coming back to the market for a third time in an effort to boost the EU economy and fight falling prices. Investors are interested in seeing just how aggressive the central bank may be willing to be in order to try and combat deflationary pressures within the Euro zone.
Speaking of central banks, markets and investors will be listening to what the Fed has to say on Wednesday as the bank makes its policy announcement. While no major changes are expected, there has been some recent talk of keeping QE intact for a while rather than continuing to wind the bond buying program down. While discussions on this may come up, investors will also be looking for any changes in guidance regarding the first interest rate hike. In addition, investors will listen closely for the Fed’s assessment of economic conditions. In addition to the Fed announcement, markets will also have plenty of data to digest regarding manufacturing, home sales, GDP and PMI.
Stocks are lower today but may have reached a near-term bottom. While some back and fill trade is to be expected, some suspect that the lows for the remainder of the year are in and that stocks may once again test their all-time highs. This could potentially be bearish for gold. In other outside markets, the dollar continues to trade not far from its four year highs, and if the greenback stays on the stronger side of things then gold buying may potentially be limited.
