Gold prices are trading flat to slightly lower on Monday to begin the new trading week. This week will be a fairly busy one from a data standpoint, and it is quite possible that gold trades sideways or simply drifts ahead of the biggest report of the week in Friday’s non-farm payrolls data for March.
Prior to the jobs report, investors will get the latest readings on Chicago PMI, PMI Manufacturing, construction spending, ISM Manufacturing, factory orders, weekly jobless claims and more. Most investors appear to feel that the economy will show continuing signs of improvement. Markets have remained in a ‘risk-on” state of mind as the situation in Ukraine has thus far remained somewhat “calm.”
Talks over the weekend between the U.S. and Russia failed to make any headway in terms of how best to proceed in resolving the crises in a diplomatic manner. The continued massing of Russian troops along the Ukrainian border certainly seems to be a cause for concern, although Russia has stated that it has no plans to invade Ukraine. Removal of Russian troops along the border could be a very big and meaningful step forward to resolving the situation.
Other factors affecting gold currently are continued concerns over the Chinese economy, and the lack of big buying in gold by China. Chinese data has shown signs of weakening recently, and this could be causing a lack of buying interest in gold from the country. Investors will have to wait and see how the data continues to play out, however, it is unlikely that weakness will cause any major bumps for global markets. There is already widespread talk of stimulus measures that could be undertaken by China in order to boost its economy.
Gold has some considerable hurdles to clear currently. The lack of escalation in Ukraine, an improving economy, and the notion of higher interest rates all seem to be working against the gold bulls right now. After getting off to a great start this year, the gold market appears to have rolled over-at least for now. Prices are now trending lower on the daily chart and there is no telling where prices may find support. Gold could potentially test $1260 on the downside before finding adequate buying interest. If the $1260 level does not hold, gold could potentially be headed for a move back down to $1200 or even lower. Bearish technical trade will likely also play a factor in gold prices for the foreseeable future.
