Posted on January 12, 2015
Gold prices are moving higher in early trade to begin the week as stocks move lower. Gold prices are trading around a one month high currently, and the bulls appear to be building some upside momentum. The $1240 level may be the next upside stop for the bulls, and a breach above this level may attract additional fresh buying interest.
This week, investors will get more fresh data to chew on following last week’s non-farm payrolls data and FOMC minutes. Of particular interest this week will be the latest data on retail sales, the fed beige book, weekly jobless claims, PPI, empire state manufacturing, Philly fed survey, consumer sentiment and CPI. The PPI and CPI data will likely continue to show a lack of inflation, especially in the face of falling oil prices that do not appear to have found a bottom yet.
This lack of inflation may very well be the factor that keeps the Fed on hold with regards to rates. While the central bank has reiterated that it will begin the tightening cycle sometime this year, the inability of the central bank thus far to spur inflation may be a cause for concern. In fact, the risk of deflation continues to increase. One need only look at crude oil or copper prices to see that deflation is a legitimate risk.
Speaking of deflation, the Euro Zone continues to struggle with flat to falling prices. It is widely expected that the ECB will take additional action in the form of QE at its meeting later this month. While the shared currency may weaken even further should this be the case, the gold bulls may actually see this as a reason to buy in spite of a stronger dollar index.
Equity markets likely still hold a big piece of the puzzle in their hands. After dropping sharply to start the new year, stock markets have largely recovered over the last couple of sessions, but are once again showing a great deal of weakness today. While calling tops or bottoms in a market is a difficult business, it would seem that the possibility does exist that stock indices are in a topping process at this point. This could fuel further gains in gold and precious metals as investors look to take profits in stocks and reallocate assets.
Gold investors will likely continue to pay attention to the upcoming elections in Greece. There appears to be less angst in the country currently as yields are falling and stocks are rising. Volatility may be seen, however, as the elections approach and this could potentially lend support to gold and precious metals.