Gold is trading slightly higher this morning to begin the new trading week. Crude oil is moving lower, while stocks and the dollar index are both moving higher.
Gold may see some buying interest following the terrorist attacks in France on Friday. Although gold and the dollar may see some safe-haven buying, other markets do not appear to be showing much reaction to Friday’s attacks. Although stock futures opened up last night solidly lower, equity futures did recover and are now higher on the day.
The French Government retaliated yesterday, striking ISIS targets in Syria. Further action by France is a distinct possibility at this point and the situation could potentially escalate.
The terrorist attacks in France could potentially have a significant impact on the Euro zone economy and could potentially give the U.S. Federal Reserve something else to consider regarding its likely plans to raise rates next month.
This week is on the lighter side from a data perspective. Markets will get the latest readings on Empire State Manufacturing, Industrial Production, Housing Market Index, Consumer Price Index, Housing Starts, Weekly Jobless Claims and more.
Perhaps the biggest data point of the week will be Wednesday’s release of the latest FOMC meeting minutes. These minutes could potentially provide further clues about the central bank’s intentions regarding interest rates. While the central bank did appear to strongly suggest a hike will be seen next month, data and other outside market factors could potentially keep the Fed on hold.
Stocks have been under pressure recently as the idea of higher interest rates soaks in. Gold, too, has seen some selling as a result of the latest FOMC statement in which the bank seemed to indicate that a rate hike was forthcoming.
The gold market may see another leg lower before building what could potentially be a long-term base. While the knee-jerk reaction to a hike by the Fed may be lower, gold may find renewed buying interest should a run be seen approaching the $1000 per ounce level.
Sentiment surrounding the gold market is once again becoming extremely bearish, and that level of bearishness could eventually point to a bottom.
While gold has a number of fundamental factors working against it currently, the yellow metal also has some positive factors working in its favor. Gold could potentially benefit from a stock market sell-off as investors may seek out alternatives. Gold may also find buyers based on the notion that even with a hike next month, the pace of rate hikes is likely to be extremely slow and incremental.
