Posted on August 19, 2013
Gold prices are trading near the unchanged mark to kick off the week. Following recent gains in gold, a period of consolidation would not come as a surprise. In fact, it would be healthy for this market in order to do another leg higher in prices.
This week is extremely light in terms of data release. Markets will digest the latest readings on existing home sales as well as new home sales. In addition, the weekly jobless claims will certainly garner some attention as well as the leading indicators data and manufacturing PMI data. Housing numbers have become perhaps even more important recently as investors begin to stress about the effect of higher interest rates on the economic recovery. Housing data has been closely scrutinized and thus far has not shown any real signs of slowing.
As interest rates continue to rise however, this could provide a huge drag as mortgages become more expensive. Should this occur, the economy will find itself in a tough spot. Housing is one of the primary economic engines and should it slow everything else begins to slow as well as consumer discretionary income levels fall. Because of this, investors will be watching information on the housing market very closely.
Unfortunately the situation in Egypt continues to get more violent. Should this situation continue to escalate, gold and precious metals could see additional buying on safe haven demand. One must remember also that Egypt controls the Suez canal, and should the turmoil in Egypt in any way effect this key waterway, the flow of huge amounts of goods including oil could come to a halt. Needless to say this could cause skyrocketing oil prices and other problems and hopefully a scenario like this will be avoided.
Oil and the dollar are also relatively flat today to start the week. Oil prices appear to be in a trading range for the time being, and the dollar continues to hover near recent lows. A breakdown in the dollar could have positive effects for gold, while additional upside in oil prices could have a similar effect. Markets appear to be taking a wait and see approach however, and perhaps the FOMC minutes this week will shake things up a bit.
This week could be choppy and erratic as many are still on vacation as the summer winds down. The gold market will be focusing on the FOMC minutes and also watching the stock market closely. Should recent selling in stocks accelerate, gold could stand to benefit as investors look for other places to put money to work.
Gold prices are maintaining trade above key moving averages and price points. For now, we expect that we will see gold prices hit the $1400 level in the coming sessions as fresh buying continues and shorts get squeezed out of the market.