Gold futures for April delivery ended the day session a tad higher at $1592.60 per ounce.
Friday saw choppy price action as markets absorbed readings on the Consumer Price Index, Empire State Manufacturing, Consumer Sentiment, and Industrial Production. The consumer price readings were perhaps the data set most closely watched by precious metals traders. The headline CPI number showed an increase of .7% which is the fastest gain in over 3 years. The median forecast was for a gain of .5% Core CPI which excludes the volatile food and energy components came in at .2% which was in line with analyst expectations.
While at a glance the headline number may seem alarming, it is important to keep these numbers in context. The core CPI number is within the Fed’s target rate and at this point longer term trends in inflation remain under control-at least for now. While gold saw a little pop based on the release of this number, the market seemed relatively unfazed by the CPI data.
What appeared to be the real driver of gold prices today was the U.S. dollar. The $USDX was weak again today after hitting multi-month highs. The Euro currency has proven itself to be extremely resilient right now, as continued attempts for a true break below the key 1.30 level have thus far repeatedly failed. Should the greenback remain under pressure it may potentially give remaining gold bears reason enough to cash in at current levels.
Obviously, there are numerous things that could prove to be the catalyst that drives gold one way or the other. Gold spent this past week right around the trading range it has seen since the beginning of March. Gold broke out to the upside earlier this week only to fail at the 20 day EMA and fall back into the previous range. Encouraging for the bulls, the market regrouped quickly and once again continued trade over the $1585 area which had acted as resistance.
While the bears still maintain technical control, it does appear that the bulls are building a little momentum here as the market seems to be trying to carve out a bottom. A failure to maintain trade above previous resistance at $1585 could put prices back into the previous trading range or even send price lower for a re-test of the lows.
The bulls absolutely must have a close above resistance at $1600 here in the near future to really get a sustainable rally going. This week was quite quiet for gold, but gold usually does not stay quiet for very long! Next week perhaps gold will make its move. The FOMC announcement on Wednesday, along with price action in the dollar will likely be the drivers behind price action.
Chart source: QST