Monday’s session for gold trading was subdued to say the least. Gold futures for April delivery traded up approximately $3.10 per ounce at $1580. Monday saw no economic releases here in the U.S. and perhaps that is the main reason for such a quiet day.
The U.S. Dollar index did roll-over a bit Monday morning after starting the day higher once again. It would appear that the stubbornness of the greenback is helping to keep a lid on gold prices currently. One must question, however, how much gas the old greenback still has in the tank.
The Euro currency once again traded below the key 1.30 level but quickly regained this level in the morning and is currently trading up about 40 ticks at 1.3043. The fact that thus far the bears have not been able to extend the lows in the Euro could be a huge gold positive. Should the shorts in the Euro scramble to cover, a several hundred point rally could ensure and take gold along with it for the ride.
Gold itself is in a similar situation. The gold bears have still not been able to extend the recent lows. It seems at this point that the market has stabilized and found a degree of equilibrium. Such periods do not typically last very long… Gold has been extremely quiet over the last several sessions but is unlikely to remain so.
As stated previously, the potential for upside is certainly there given the recent price action. $1585ish on the daily chart still looks to be near-term resistance that must be overcome. Should this level get taken out, a close back above $1600 in the coming sessions would be a very good possibility. Closing above this level would likely attract more buyers and could propel the rally to the $1630 region very quickly.
This week the markets will see readings on retail sales, the producer price index, weekly jobless claims, the consumer price index, and manufacturing. The gold market will be paying particularly close attention to the inflation readings. The consensus for CPI is a .2% increase excluding food and energy. Any readings on either the producer level or the consumer level could have a dramatic effect on gold prices.
On a broader note, it seems also that markets are still attempting to figure out the precise intentions of Bernanke and the central bank. Although Bernanke has recently reiterated his intention of continuing bond purchases for the time being, no one really seems to know at what point and exactly how the Fed will go about withdrawing liquidity. Until there is more clarity surrounding this issue, many markets including precious metals are likely to see more range bound action than anything else.
Chart source: QST
