Market Overview: The gold market is seeing some solid buying interest in early trade today as the bulls look to extend the current uptrend and market fundamentals remain positive. A strong technical outlook is also likely contributing to gold’s upside, as the dip seen in last week’s action was bought. Gold may now be poised to challenge its recent highs just above the $1300 mark, and could potentially see another significant leg higher in price.
Key Data Points: The latest data on Empire State Manufacturing was released earlier this morning. The gauge showed a downturn in manufacturing, coming in with a reading of negative 9.02. Consensus estimates were looking for a reading of 7.00. While manufacturing data has shown some signs of life in recent months, this report may be indicative of fading momentum. Today’s weaker than expected reading will likely garner additional scrutiny over the Philly Fed Manufacturing data to be released later in the week.
The Housing Market Index was also released this morning and shows a steady but not overly significant level of optimism. Sales were the strongest component of the report, although they may still be considered somewhat slow given extremely low interest rates and recent job growth.
Outside Markets: Gold is likely getting a boost today from a weaker dollar index. While the dollar index has been trending lower, the greenback did stage a false breakout recently and saw a moderate rise from recent lows. Whether or not the dollar can maintain any significant upside remains questionable. The market is likely awaiting further clarity on the pace and timing of further interest rate hikes before continuing its current downtrend or reversing course.
Crude oil is on the rise today and continues to show further signs of life. Oil is now approaching the $50 per barrel level, and thus far is not showing signs of rolling over. Some analysts have raised their price targets for oil recently and apparently the supply glut that drove oil to around $30 per barrel has seen a significant dent.
Stocks are higher today as investors appear to be ignoring more downbeat economic data out of China. As has been the case for some time, the equity market is likely seeing buying as crude oil prices climb and energy and materials companies see buying interest.
Strong retail sales data released late last week may also be a factor in today’s higher stock prices. The stock market may simply be seeing a bounce following recent selling pressure and could be vulnerable to another leg lower if the bulls fail to garner momentum.
The Big Picture: The gold bulls remain in firm control and dips in gold continue to be bought. The combination of weak Chinese data, a slumping dollar index and uncertainty over stock’s ability to make new highs are all likely factors contributing to gold’s upside. Given the fact that the pace and timing of additional interest rate hikes by the Fed could be slower than anticipated, the bulls seem to be sounding the “all clear” and the path of least resistance in gold remains higher.
