The gold and silver markets are both seeing some significant selling pressure this morning as investors appetite for risk increases and the dollar index sees some buying. While both stock index futures and crude oil were higher earlier in the session, however, both have come off in early trade and declining oil could potentially drag equities down and some risk appetite along with it.
Gold is seeing some heavy selling today and much of the downside in early action could be the result of sellstops being triggered as longs take profits. From a technical standpoint, the gold market remains in an uptrend. The bulls’ reaction to today’s selling could potentially be of significance. If today’s dip in prices is bought aggressively, gold may simply rebound in the coming sessions and challenge the recent highs. On the other hand, if gold sees some follow through by the bears this week, it could potentially put a dent into bullish sentiment, and a larger scale correction could be seen.
Gold has been moving higher on the back of a weaker dollar index and uncertainty surrounding the pace and timing of further rate hikes by the Fed. The dollar, after trading below a previous key support level, has rebounded sharply in the last few sessions in what may prove to have been a false breakdown. Should the greenback continue to recover, it could potentially fuel further selling in the yellow metal and other commodities.
This week is on the lighter side from a data perspective, although investors will still have some key pieces of data to chew on. Markets will get the latest readings on Wholesale Trade, Import and Export Prices, Weekly Jobless Claims, Retail Sales, PPI and Consumer Sentiment.
The recent jobs data for April may remain an area of focus early this week, and investors will likely closely scrutinize the data stream for any clues pointing to potential weakness. It is believed by many now that a June rate hike is off the table following the less than stellar jobs report. A December hike may be a possibility, although interest rate expectations could potentially change quickly before then.
The next several sessions may be key to gold’s near-term direction. A quick recovery by gold may attract further buying interest, while further downside may potentially cause more longs to book profits and exit. As has been the case for some time now, dips in gold may be bought until proven otherwise.
