Gold prices have fallen to session lows as crude oil prices are getting hit once again. Oil prices have fallen below the $60 per barrel mark and are thus far showing no signs of slowing down. Weaker oil again today is causing some selling in stocks while the dollar index is also lower on the session.
Gold prices are likely seeing some profit taking today after recent gains. The price of gold has covered about $100 worth of upside in recent weeks and a period of price consolidation comes as no surprise. In fact, since falling below the $1140 per ounce level in early November, gold prices have been on a steady uptrend and have seen some increased volume. While this could potentially bode well for the bulls, gold still has plenty of work to do.
Oil prices will likely continue to dominate headlines going into the end of the year. The steep decline seen in crude oil prices has been nerve racking for investors-and at this point no one knows if the drop is nearing its end or if there is significant downside still to come. While stocks have proven to be very resilient over the last year, the drop in oil could potentially be the catalyst for a larger correction than has been seen thus far. Should this prove to be the case, gold and perceived safe haven assets could stand to potentially benefit.
Gold may see limited price action going into year’s end. The fact is that higher interest rates appear to be on the way, and the notion of higher rates may weigh on gold and precious metals. That being said, one could certainly make the argument that once the Fed does begin the tightening process, gold prices may see more buying interest. With the uncertainty over when the Fed may begin moving removed from the equation, investors may begin to focus more on where rates may be headed. It is difficult to imagine rates rising a great deal anytime in the near future. Even with higher rates, gold may see more buying interest based on the notion that rates will likely remain at low levels for the foreseeable future.
Investors will be looking forward to next week’s FOMC announcement for further clues on the Fed’s plans. In addition, investors will also pay close attention to the central bank’s assessment on economic conditions. The Fed’s commentary may drive price action in the dollar, which at this point is looking a little tired. Should the greenback begin to show signs of weakness, further fresh buying interest may be seen in gold and the metals complex.
