Gold prices are moving higher in early trade on Friday to finish out the trading week. Gold prices are back above the psychologically important $1200 level and may be headed for an another run at resistance around $1220 in the coming sessions. Gold is gaining some bullish momentum as uncertainty over interest rates and other factors drive buying and cause some short covering.
Gold is higher today despite the U.S. Dollar index being higher as well. Gold is trying to make a stand as the dollar index threatens to make new highs in the near future. The dollar has likely been a large factor in gold’s lack of bullish follow-through, and further strength in the greenback may once again limit the bulls’ ability to take prices significantly higher.
Gains in the dollar may be limited, however, by uncertainty surrounding the Fed and its plans with regards to interest rates. Following a big miss in last week’s non-farm payrolls data, some believe that the central bank may elect to hold off on raising interest rates. While some talk of a June hike or perhaps a September hike still exists, many now seem to believe that the Fed will hold off-perhaps until sometime next year even. Should the central bank indicate that it is likely to stay the course for now, it could potentially deflate buying interest in the greenback and boost gold, silver and precious metals.
Crude oil prices may also affect gold in the near-term. After seeing a bit of a rally recently, crude oil has once again come under pressure and may move back below the $50 per barrel level. Some analysts still believe that a move as low as $30 per barrel is in the cards. Should oil prices begin another significant leg lower, it could potentially drag on gold as inflationary fears ease further.
Stocks, on the other hand, appear to be headed back towards their recent highs and perhaps beyond those highs. The notion of the Fed keeping rates steady for the foreseeable future is helping to drive buying in equities. This stock strength may potentially have a negative impact on gold prices. Should the Fed indicate that it intends to move forward with the first rate hike sooner as opposed to later, stocks may potentially see selling that could possibly drive capital into the precious metals complex.
Regardless of the likelihood of a rate hike in the U.S., gold may also see some degree of support from ongoing QE in the EU and other regions. In addition, ongoing uncertainty over Greece’s future in the EU may support gold as well.
