Well it was a nervous weekend for investors. Everyone was paying close attention to the developments coming out of Cyprus on Sunday. A deal was in fact reached, and Monday morning saw markets trading higher with safe-havens such as gold and bonds trading lower.
The euphoria did not last long however. The stock market gave back all its gains throughout the early part of the session, and at one point was down sharply with the Sp500 trading down about 10 points. Gold futures for April delivery put in a low early in the session at $1588.40 and never looked back.
Prices climbed as high as $1606.80 before being trimmed a bit going into the pit session close. Gold finished the day with just modest losses as apparently the bailout is now being second guessed. In addition to the weekend news continuing to be scrutinized, gold was due for a bit of profit taking and that likely played a role in today’s downside as well. The U.S. Dollar index was sharply higher, as the Euro currency was crushed. Continuing uncertainty regarding future EU banking problems is likely to keep a safe-haven bid in gold intact.
In addition to the news out of Cyprus, the gold market also heard commentary from Ben Bernanke in which Bernanke discussed the benefits of monetary policy accommodation. It would appear that the gold market took his comments as a sign that stimulus will continue to be forthcoming for a while.
Looking at the week ahead, the markets will have plenty of additional data to digest even in this Easter holiday shortened week. Tomorrow markets will see readings on new home sales as well as the Case Schiller index. Tomorrow also brings readings on durable goods orders as well as manufacturing. Later in the week markets will see data on pending home sales, GDP, weekly jobless claims, Chicago PMI, and consumer sentiment.
Although the markets will certainly be paying attention to this data, headline risk out of Europe will likely continue to dominate trade. Should pressure stay on the Euro currency, or should investor concerns about a European bank run intensify, then things could get dicey which would likely benefit gold prices.
Gold did quickly regain the psychologically important $1600 level which is a good sign. The gold bulls need gold to trade above the band of resistance from last week’s high of $1616.50 (April gold futures) to $1619ish. Should this area be taken out in convincing fashion, it would likely invite larger size buying into the market and a good push to the upside could take place. The bears need to take out last week’s lows at $1589.60 in order to get something going to the downside.
Chart Source: QST
