Gold prices are trading moderately lower this morning as the market remains vulnerable to technical selling. After a bit of a wild week last week, gold prices may settle in a bit and consolidate for a while as investors await fresh news from the Fed and continue to monitor the data stream. This week, investors will have plenty to chew on as the markets will get the latest readings on consumer confidence, durable goods, GDP, weekly jobless claims, pending home sales, and more.
In addition to the data being released, investors will also be paying close attention to commentary by several Fed officials this week. James Bullard was quoted last week as saying that the Fed may announce plans to taper as soon as October. While it certainly remains unclear as to exactly when the Fed may make a move, looking at gold prices and the lack of follow through thus far would seem to indicate that the majority of market participants feel tapering is right on the horizon.
The tapering issue appears to be old news at this point. Markets will begin to focus more on the data stream and the upcoming battles with the debt ceiling looming again and the possibility of a government shutdown. This will likely be the center of attention for the time being, and could potentially give precious metals a boost should the situation become worse. With regards to the data stream, investors will also be watching closely as the Fed did indicate some concerns with the economy and especially job growth and therefore held off on tapering.
Should the data take a significant turn for the worse, it is possible that the Fed’s plans could be effected. While most economic reports remain relatively positive and we do not expect this, it is something to consider. In addition, investors will continue to watch the U.S. dollar index which is currently trading at the lowest levels since June. Should the dollar convincingly take out its 200 day EMA at the 80.57 level it could tumble quite a bit further and possibly give the precious metals comp0lex a big boost in the process.
From a technical standpoint, gold is now trending lower on the daily charts. Gold prices are back below the 9,20, and 50 day EMA’s and as of right now look poised for further downside. The fact that gold could not hold the post-Fed gains is bearish. If the rally had legs we would have expected to see some follow through buying which thus far has been lacking. The bears will now target last week’s lows around $1291.50 while the bulls need trade back above $1350 to regain some momentum.
