Markets are closed today for Good Friday. Gold did have an interesting week, however, leading up to today. After trading over the $1331 level earlier in the week, gold prices took a major tumble on Tuesday and saw trade take the yellow metal from $1328 or so all the way down to the $1284 area before bouncing back towards the $1300 level into the close. Gold on Wednesday attempted to hold the psychologically important $1300 level by closing just above it. On Thursday, however, the yellow metal closed decidedly below this key level which could potentially indicate further weakness on next week’s opening.
Many explanations were given for gold’s drop this past week. One of the biggest circulating was the notion of tax selling in bullion before the tax deadline. In addition to this, gold appeared to take out clustered stop loss orders causing a further slide in prices. The price action in gold this past week was somewhat baffling given the escalation being seen in Ukraine. Markets have thus far been able to discount the situation in Ukraine, but one has to wonder just how much more willing the markets will be to turn a blind eye towards the situation if further escalation is seen or if violence erupts. While anything is possible, it is hard to imagine gold prices falling too far in light of the ongoing crises.
Also likely weighing on gold this past week was the recovery seen in equities. Equities opened the trading week on the defensive following some selling pressure seen last week. The stock market recovered nicely, however, and the SPs saw a near 60 handle bounce from the week’s low to high. Perhaps this could also be attributed to the end of the tax year, or perhaps investors simply saw recent price action in equities as an opportunity to buy a dip. Whatever the case may be, stocks could potentially be getting geared up for another leg higher-and new all time highs as well. The gold bulls may have their work cut out for them should this prove to be the case. As long as risk assets are moving higher, gold may be lagging as risk appetites remain high.
From a technical standpoint, the gold bears now appear to be retaking control. The slide this past week negated the uptrend that was seen on the daily charts going back to the beginning of April, and near term support may be seen at the previous swing low of $1280ish. Near term resistance may be seen at the $1300 level and last week’s swing high in the $1331 neighborhood.
