Gold prices are slightly weaker to begin the new trading week. Stocks are sharply higher this morning as is the dollar index while crude oil is also moving higher.
This week will be on the lighter side from a data perspective. Markets will get the latest readings on existing home sales, Richmond Fed Manufacturing, MBA Mortgage Applications, PMI Manufacturing, durable goods orders, weekly jobless claims, new home sales, GDP, consumer sentiment and PMI Services.
There will also be a few speeches by various Federal officials this week.
With less hard data to scrutinize this week, investors will likely continue to focus on last week’s FOMC meeting announcement. The FOMC decided to hold off on raising rates — at least for now — but maintains that a 2015 lift-off is still likely.
The FOMC cited certain issues that played a role in its decision to hold rates steady for now. Concerns over the slowdown being seen in China played a role, as well as recent stock market volatility.
If the central bank does, in fact, plan on hiking rates this year, a hike will have to come at the October or December meeting. While the Fed does appear ready to stay the course and initiate its first rate hike in many years, data and markets could potentially give the Fed further reason for pause. Things have been quieter in recent weeks following a significant increase in volatility, but that can potentially turn on a dime. If China sees another significant bout of selling in its equity markets, it could potentially spill over into other stock markets. The Fed could potentially rethink its desire to hike if stocks are on the defensive and volatility is on the rise.
While the gold bulls have built some near-term momentum, the bears still appear to be in control. After rallying to the $1170 area as stocks got pummeled, gold apparently ran out of gas and retreated back to the $1100 level. A recent run back to $1140 looks encouraging, however, it appears that once again gold may be running into sellers.
The next several sessions could be key for gold as investors digest the Fed’s remarks. Whether a hike comes in 2015 or in early 2016, a hike is on the way. While this may be a foregone conclusion at this point, investors will likely be looking for further guidance on the pace and magnitude of additional rate hikes.
Gold could potentially stand to benefit if stocks weaken when the Fed does take action. If stocks move back towards recent all-time-highs, however, gold may remain vulnerable to another leg lower in price before possibly finding a long-term bottom.
