Gold prices are moving lower in early trade to begin the new trading week. The yellow metal is seeing some additional selling today as crude oil prices and stocks move lower while the dollar index moves higher.
Last week saw gold prices breach the $1300 level to the upside but the market failed to hold there. This failure to hold above the key $1300 level likely was a contributing factor to some of the selling seen in gold during Friday’s session. In addition, profit taking after the recent move higher in gold was also seen going into the weekend.
While gold prices may not drift too far from last week’s highs, the market will get plenty to deal with this week in terms of news and data.
Over the weekend, the Syriza party won the general election in Greece. This party is considered to be anti-austerity and its victory will intensify concerns over Greece and its status within the EU. On an even larger scale, the election win could send a message to other anti-austerity parties elsewhere-particularly in Spain-where elections will be held later this year.
Fighting in Ukraine has intensified once again. After seemingly falling out of the headlines for several months now, the violence in Ukraine has once again reared its ugly head this weekend.
The U.S. data week is jam-packed. Markets will get the latest data on manufacturing, durable goods, consumer confidence, new home sales, weekly jobless claims, consumer sentiment, Chicago PMI and GDP.
The highlight of the week, however, will likely be Wednesday’s FOMC meeting announcement. The Fed is expected to leave rates unchanged. Investors will be looking for clues as to the potential timing of the first rate hike as well as the central bank’s assessment on economic activity.
Given the recent QE package announced by the ECB, this week’s Fed meeting may garner even more attention. While most still expect the Fed to begin hiking rates sometime this year, there seems to be growing speculation that the central bank may hold off based on economic struggles in the EU and other areas as well as the ongoing lack of inflation.
The technical picture in gold continues to improve. The market has sailed higher to begin the new year and has thus far cut through several areas of resistance. The market may simply go into consolidation mode ahead of the FOMC meeting this week. Given recent strength in gold, a pullback is a distinct possibility before the bulls take another run at a solid close or consecutive closes above $1300.