Gold prices are moving higher today as stocks trade slightly lower, crude oil sinks and the dollar index moves lower. Gold prices have not strayed far from multi-month highs seen recently and the bulls appear to be in firm technical control at this point.
Gold is benefiting from increasing risk aversion in the marketplace. Both China and the Eurozone reported more downbeat economic data that will likely further fuel worries over global deflation.
Investors will have plenty of data to consider this week. Set for release are the latest readings on: ISM Manufacturing, Personal Income and Outlays, Construction Spending, Motor Vehicle Sales, ADP Employment data, PMI Services Index, ISM Non-Manufacturing, Weekly Jobless Claims, Productivity and Costs, Factory Orders and Non-Farm Payrolls data for January.
Investors will closely scrutinize the data and will look for any further clues as to the potential timing and pace of additional interest rate hikes. While many analysts believed that the central bank would hike rates four times this year, rate expectations could be changing with some analysts now calling for only two rate hikes. Increasing risk aversion and changing economic conditions are cited for the potential change in the pace of further hikes, and the central bank will likely pay close attention to any ongoing volatility in China or emerging markets.
Crude oil also remains a center of attention for investors. While oil has bounced in recent trade, crude may have a tough time getting any real traction to the upside given the current supply/demand situation. Equity markets seemingly rise and fall with crude oil currently, and lower oil will likely fuel deflationary fears. As long as oil remains under pressure, equity markets may have a difficult time going much higher from current levels. Any rallies in stocks may now be potentially sold into, and this could possibly work in gold’s favor.
As investor demand for gold increased in recent months, the U.S. Mint reported that gold coin sales rocketed higher by 53 percent in January. The mint reported that it sold 124,000 ounces of American Gold Eagle coins, the highest level since September and a 53.1 percent increase from last January.
As investors seek out alternatives to equities and other risk assets, demand for gold and silver could potentially increase further. While a rise in demand at the beginning of the year is not much of a surprise as investors begin allocating assets, the rise seen this January is likely largely attributed to the poor start to the year seen in equity markets.
