After making a key outside day reversal on the daily chart on Friday, gold prices are slightly lower to begin trading this morning. Gold is currently trading in the $1166 area and is just shy of retesting the breakdown level in the $1183 area.
The data week will be a bit on the slower side compared to last week. Tomorrow is the Veteran’s Day holiday in the U.S. and while the stock and futures markets will remain open, the bond market will be closed. There is no data of significance set for release today or tomorrow.
The biggest data points of the week will likely be the latest reading on weekly jobless claims and retail sales. In addition, St. Louis Fed President James Bullard will be giving a speech Friday on the economy and monetary policy. This could potentially be of interest as Mr. Bullard had recently discussed the notion of the Fed holding off on ending its QE program. Needless to say, the fact that the Fed did end QE and some of the Fed’s commentary were decidedly hawkish.
There has been recent chatter about the notion of a bottom being reached in gold last week. While this is certainly possible, it does not seem likely. Gold could, however, be entering a more neutral phase for a period of time. Markets do not typically go straight up or straight down, and the gold market will quite possibly see some considerable back and fill trade before deciding its next move.
Given the overall technical picture currently, the bears have a clear edge and the gold bulls have a great deal to prove. Gold may still test its recent breakdown level of $1183. The bulls will have to produce a very solid close-or even consecutive solid closes above this level to negate the breakdown.
The USD and the Euro remain a driving force in gold. The Euro is looking a bit oversold and a short-term bounce is likely. Conversely, the dollar index may take a breather before resuming its uptrend. Dollar strength has been a formidable obstacle to higher gold prices and does not appear to be going away anytime soon.
Stocks appear to be headed higher for the time being and this may also work against gold and precious metals. While anything is possible, it would seem that gold and equities will continue to have a negative correlation for the foreseeable future.
Today’s session is very important for gold. Following Friday’s key reversal higher, the bulls must show some follow through very quickly. If not, the bears will likely resume solid technical control and look to drive prices to fresh multi-year lows.
