As of today the U.S. Is still mulling over its options for a potential military strike against Syria. Although the chances of a strike appeared to recede late last week going into the long Labor Day holiday weekend, we feel it is likely we see some type of action in the near future.
What that action might be is anyone’s guess, but it seems that President Obama is looking for something that would be strong and send a clear message while not being so strong as to provoke confrontation with other parties involved such as Russia. Clearly there is a balance that needs to be struck, and given Russia’s opposition to the use of force already the process must be handled very delicately.
Gold prices eased a bit last week ahead of the weekend as the idea of a strike this weekend lost ground. Although we found this a little surprising, we do feel that gold is likely to see some buying interest this week even though it is beginning the week on the defensive. Investors will be watching any developments with regards to Syria very closely, and any news could be potentially market moving.
Over the weekend, the markets got readings from the purchasing manager’s index in both China and Europe. Both sets of data showed improvement and stock index futures traded sharply higher off of the news. Between this and the backtracking on Syria, it is possible that safe haven instruments such as gold see some selling early in the week. This will be a good test for the gold bulls. If the economy continues to show signs of improvement and geopolitical tensions ease, how the gold market fares may be a good indication of things to come.
Should gold prices stand their ground for the most part, it would be yet another sign of underlying strength and further gains could come in short order. Should gold prices really start to fade however, this could indicate that the market is not as strong as it currently seems and that lower prices may once again be on the horizon. The $1350 level seems to be a key point on the daily charts. Should prices dip to this level we feel that the dip would likely be met with willing buyers. Should prices fall below this level however, we could see a rapid trip back down to the $1300 area. On the upside, we still feel that if gold can hold the $1400 level we could see a test of the 200 day EMA around $1470.
