Gold prices are moving sharply lower this morning as stocks are slightly higher, crude oil prices fall and the dollar index is slightly weaker.
Gold appears to be falling today as technical trading sends prices lower. It would seem that many bulls are getting out of longs today in gold, and the market is likely seeing downside today exacerbated by sell stops being triggered. As of this post, the gold price has fallen below former support in the $1180 area. A close below this level may potentially indicate further selling pressure in the coming sessions.
As has been the case for some time, gold seems to be lacking any significant bullish catalyst at this point. While the market traded above the psychologically important $1200 level briefly, it could not take out overhead resistance in the $1220 area. This lack of follow through once again by the bulls may potentially see prices begin another leg lower. A close below $1180 could possibly set the stage for a re-test of $1140. A break below $1140 could potentially see gold prices fall significantly.
A potential Greek default, however, may keep losses in gold to a minimum. Greek bond yields have been soaring again. The inverted yield curve in Greek bonds is indicative of a likely Greek default. While talks between the country and its creditors have been ongoing for several weeks now, no meaningful progress has been made and time is running out. Markets thus far seem to be largely shrugging this off, however, should Greece actually default it could potentially rattle global financial markets and send investors running for the exits. This could potentially benefit gold and silver, as investors may move capital into the precious metals space for its perceived stability.
The precious metals complex also remains on “Fed” watch. The FOMC will be meeting again next week, and investors will likely pay close attention as debate continues on the future of interest rates. While no changes to policy are expected next week, markets will be looking for any additional clarity from the Fed about the timing of an initial rate hike. A hawkish sounding Fed may add to selling pressure in gold, while a more dovish sounding Fed may potentially give gold and silver a boost.
In addition to the Fed and Greece, the non-farm payrolls data for April may play a large role in gold’s near-term prospects as well. Following last month’s disappointing data, another miss on the jobs data may force the Fed to hold off on hiking rates, while a good number may potentially pave the way for the central bank to begin hiking rates.
