Gold prices are quietly moving higher today as markets see limited interest on the Columbus Day Holiday. The gold market has seen renewed buying interest in recent trade, and some shorts have likely been squeezed out of the market.
Gold has a few factors currently working in its favor. First and foremost, the markets have adjusted their expectations for a rate hike from the Federal Reserve. While the Fed has reiterated that a rate hike would come before the end of the year, the idea of a hike this month or in December seems less and less likely. While the Fed clearly has its attention focused on China and the economic slowdown being seen there currently, there are other issues at work, as well, that may keep the Fed on hold for longer than expected. Recent economic data — specifically last month’s jobs data — is also likely a large cause for concern for the central bank. If the non-farm payrolls data for October (to be released the first week of November) is also a disappointment, it could potentially rule out a hike in December. Should this be the case, the Fed could potentially be on hold for the first few months of next year.
In addition to the economic data stream, the Fed and investors will also be paying close attention to China and looking for signs of further market volatility. While markets have been calmer in recent weeks, the tide can turn rapidly, and should stocks begin to weaken significantly, it could possibly give the central bank another reason to be patient. Stocks have been moving higher from recent lows and currently look poised for more upside. That could change, however, should Chinese stocks begin to see significant selling again.
On the other side of the coin, the dollar index has been weakening on the notion of the Fed standing put for now. The dollar bears are building some momentum, and further weakness in the greenback could potentially fuel more fresh buying in gold while squeezing more shorts out of the market. The market is near a recent swing high in the $1170 area currently, and a break above this level could possibly drive more technical buying.
This week is fairly light from a data standpoint. Markets will get the latest readings on PPI, Retail Sales, Beige Book, CPI, Weekly Jobless Claims, Empire State Manufacturing, Consumer Sentiment and more. Gold will likely take its cues from key outside markets, as well as technical trade.
