Gold prices are quiet thus far this morning to begin the new trading week. Stocks and oil are moving slightly higher while the dollar index is trading moderately lower.
Gold has regained some lost ground in recent trade, and may be poised for further gains. Should the dollar index continue to see some profit taking and weaken further, it may help the gold bulls establish additional upside momentum.
The dollar saw some volatile trade last week following the FOMC announcement on Wednesday. While the central bank did drop the word “patient” from its statement, Fed Chairwoman Janet Yellen did reiterate that just because this word has been dropped does not mean the Fed will be impatient. In fact, it did seem as though the Fed wants to leave its options open, and will base any future monetary policy decisions on data.
While some may construe the Fed’s remarks as being “mixed,” it does appear that the first rate hike is likely to come in June or perhaps September. Perhaps more importantly, the Fed also reiterated the fact that any rate increases are likely to be small and incremental, and may not come as soon as markets had expected. Stocks and gold both saw buying likely based on this notion, and the initial rate hike appears to have already been discounted by the market.
Gold is still in need of a bullish catalyst, however. That catalyst may come in the form of failed negotiations between Greece and the EU. While Greece has been meeting with EU officials, many reports claim that the talks are not going well. In fact, the two sides still appear to be very far apart. The four month bailout extension Greece secured will have come and gone before long, and without any progress on further negotiations, the likelihood of a Greek exit from the EU becomes more and more likely.
While such a scenario may potentially benefit gold, no one can say for sure how a Greek exit would impact global markets.
Markets will have plenty to chew on this week. The latest data on existing home sales, durable goods orders, GDP, weekly jobless claims, new home sales and consumer sentiment are all set for release.
The gold bulls have momentum on their side currently, but still have a lot of work to do. The market has traded back above former support in the $1180 area, but will likely not attract significant fresh buying interest unless a move above the recent highs around $1220 is seen. Dollar weakness could potentially give the gold market the boost it needs to trade above this level, while stock weakness may also work to gold’s advantage.
