Gold is starting the week off on the right foot. Gold is trading slightly higher during Monday morning’s session as shorts continue to cover some positions and some longs step into the market here attempting to buy bullion at a discount. There is certainly no shortage of things going on regarding the state of the global economy this week.
Market participants will be closely watching ongoing meetings of Eurozone ministers for any clues as to how the potential political shift in Italy may play out. This could have a huge impact on gold prices as an anti-austerity party win could wreak havoc on the Eurocurrency and send markets for a ride. One could make arguments both ways as to how this could affect gold prices. While this would further strengthen the dollar which is often a negative for gold prices it could create such a level of fear that investors may see no viable alternatives to park money in besides gold.
Upcoming Data
Domestically we will see data this week on factory orders, ISM non- manufacturing data, weekly jobless claims and then of course the big enchilada on Friday in the department of labor’s monthly non- farm payrolls report. While all data released this week will be closely scrutinized for clues as to how the economy is moving and what the Fed may or may not do, it is this jobs report that could make or break the current rally in stocks and/ or the dollar.
The current consensus is for the U.S. to have added another 171,000 jobs and for the unemployment rate to come in at 7.8%. A huge miss or a huge beat could be the catalyst to get markets moving. Finally, there will be a number of Fed governors speaking this week and their opinions or statements on policy could affect bullion prices as well.
Technical Picture
Although there are many fundamental factors that could potentially drive bullion prices sharply higher, the bears still maintain the near- term technical advantage. Not much has changed looking at the daily or even weekly timeframes. Depending upon how this week’s data is interpreted by the market, it is quite likely we will get clues this week as to whether gold is set to reverse here or continue to remain on the defensive.
It is possible that we saw a swing low in gold last week, although it fell slightly short of downside targets. It would appear that te market may have gotten a little too bearish here and that the oversold condition in gold will be corrected soon Trade below last week’s lows sets up more near- term downside. If those lows hold it becomes likely that gold males a run above $1600 in the coming days.
