Gold prices are moderately lower Monday to start the new trading week. This week is light in terms of data here in the U.S. There are some federal reserve presidents speaking however, and their comments will likely be closely scrutinized for any additional clues on the future of the Fed’s QE program. Unfortunately, this debate over the future of QE will likely continue for the next few weeks until the Fed meeting next month. Investors who were looking for more definitive clues from last week’s FOMC statement were surely disappointed.
The lack of fresh news regarding QE last week did not seem to faze the stock market much. In fact, the stock market now seems to be in a place whereby good news is bullish and bad news is also bullish. The market continues to climb as the data stream shows improvement, and should the data start to sputter the market will likely still climb because that increases the likelihood that the Fed may continue its bond purchases for a bit longer than expected.
Other risk assets are also likely to continue to climb as the economy improves. The gold market however, seems to be stuck in no man’s land here. It is very tough to make a judgment call here on the yellow metal without a more definitive idea on what the Fed might do and when they might do it. This likely took some of the bullish interest out of the gold market last week, and for now it is difficult to justify a large rally in gold prices.
The bears remain clearly in control of gold prices. The gold bulls were putting up a good fight as of last week however, the lack of any help from the Fed and a failure at the key 50 day EMA will likely make life difficult for the gold bulls in the near term. Today’s price action saw gold prices slip back below their 20 day EMA, and it appears that many bulls who bought near the last swing lows are throwing in the towel.
Should prices break below last week’s low of $1283, the market could see a sharp drop in prices again as sell stops are triggered and more bulls bail out of the market. With a lack of data this week and no imminent Fed action, the market will likely trade on technicals and physical demand for the next several weeks. Demand has remained what we would call “Consistent” however it remains well below the levels seen following the April sell-off.
