Posted on April 01, 2013
Gold prices sought higher ground during Monday’s trade. Spot gold is back trading at the $1600 level.
Data released Monday included the PMI manufacturing index, the ISM manufacturing index, and construction spending. Monday’s round of data was a tad on the weak side and spurred some selling in equities. Gold appears to have been bid up on safe-haven buying.
In addition to today’s data, markets continue to watch the situations in Cyprus and the unfolding tensions surrounding North Korea. The Cyprus issue did not provide much for headlines over the weekend, or during Monday’s trade. As discussed in previous commentary however, the possibility of a financial meltdown or a bank run is still very real and needs to be taken seriously. It is extremely likely that we have not heard the last about European banking issues and that is likely to help keep a floor under bullion prices.
As if the Cyprus situation was not enough to worry about, The conflict with North Korea continues to escalate. The U.S. is now flexing more military muscle with its decision to send F-22 Raptor jets to South Korea. Obviously everyone is hoping that the North Korean leadership will be convinced that provoking the U.S. into a military conflict would be a bad idea. Hopefully the presence of U.S. firepower will change their thinking. In the meantime, the idea of an armed conflict will likely also help keep a floor under gold and prevent prices from falling too far.
The U.S. Dollar index traded lower on Monday which can be supportive for gold. The DX was likely lower on just profit taking, and the dollar bulls remain remain in control. Although the dollar and gold prices often move inversely of one another, escalating tensions with the North Koreans could be one of those instances in which both markets move up together.
The rest of the week is fairly light in terms of data until Friday’s non-farm payrolls report which will provide some much needed insight into the labor market. Markets will get readings on factory orders, ISM non-manufacturing, and weekly jobless claims in the meantime. The employment report could have a large impact on bullion prices.
Gold prices continue to trade sideways for the most part as neither the bulls nor the bears have been able to gather enough momentum for a breakout. Gold futures for June delivery are currently trading right around the 9 and 20 day EMA’s. Bulls need to take out the March high around the $1618.30 level while bears need to take out the March low of $1562.50.