Gold is moving slightly higher today to begin the new trading. The gold bulls appear to be taking a breather currently after driving prices higher by $90 per ounce over the last several weeks. Since seeing prices trade over the $1190 level recently, however, the market has been trending lower and could be vulnerable to further selling. The bulls will likely need to make a stand soon in order to keep longs interested.
The gold market may, however, be relatively quiet in early action this week as investors await the results of this week’s FOMC meeting. While a rate hike by the central bank seemed like a sure thing just a few months ago, market expectations for action by the Fed have dwindled. Some believe that the Fed will elect to sit tight until 2016 and perhaps initiate lift-off in March. While a hike this week seems extremely unlikely, the Fed could possibly act and catch markets off-guard. Due to this possibility, however remote, many investors could elect to sit on the sidelines this week.
In addition to this week’s FOMC announcement, markets will have other data to chew on. Today’s data includes New Home Sales and Dallas Fed Manufacturing. The rest of the week, investors will also get the latest readings on Durable Goods Orders, the Case-Shiller Home Price Index, Consumer Confidence, Weekly Jobless Claims, Q3 GDP, Pending Home Sales, Consumer Sentiment, Chicago PMI and more.
The Chinese Government five-year planning meeting is also taking place this week and could potentially drive markets and sentiment.
According to recent CFTC data released, small speculators have increased their net long position in gold to the highest level since February. Although much of the buying seen in gold recently has been due to shorts having to cover, there has been substantial fresh buying in the market which could be considered bullish.
As many of the gold market shorts have likely already been squeezed out of the market at this point, the gold bulls will have to rely on new longs to generate further upside momentum. While this could prove to be the case, gold has been sluggish in recent sessions and is once again showing signs of fading.
The recent rally in the dollar index is likely a contributing factor to gold’s recent lack of follow through. The dollar and gold, however, could possibly see some big moves this week depending on the FOMC and its outlook on monetary policy.
