Posted on November 17, 2014
Gold prices are steady to slightly higher on Monday morning to begin the new trading week. The strength seen in gold during Friday’s session could be indicative of more gains to come. The gold bulls will have to show some follow through today or tomorrow in order for the potential rally to continue. Gold has rallied recently only to fizzle out, but this time around appears to be different. The market has been able to get back above the previous breakdown area of $1183 and the technical picture is improving.
Overnight, Japan reported that third quarter GDP actually declined by 1.6 percent. A growth in GDP was expected. This poor report highlights what appears to be a current theme in world markets right now. Many economies continue to struggle, and those struggles may be ongoing for some time. Troubles in Japan and the Euro zone will take time to fix. The U.S. appears to be one of the economies that is performing better-albeit modestly. This in turn will likely keep the dollar index well-supported for the time being. That being said, a higher dollar may still prove to be a large obstacle to significantly higher gold prices.
This week, investors will once again get plenty of data to chew on. Industrial Production and Empire State Manufacturing data will be released today. PPI and the Housing Market Index are set for release tomorrow. On Wednesday, investors will get the latest reading on housing starts and will also digest the latest FOMC meeting minutes. Thursday and Friday will bring CPI, PMI, Leading Indicators, Weekly Jobless Claims and more.
The FOMC minutes will be one of the data highlights of the week. Now that the Fed has halted its QE program, investors will be looking for any clues the central bank may give as to the timing of rate hikes. In addition, the markets will also be interested in the central bank’s assessment of economic activity.
There is also the upcoming Swiss referendum on gold. While opinions vary on the likelihood of a “Yes” vote, there is the possibility that the Swiss National Bank will repatriate its gold and have to hold 20 percent of its assets in gold. The bank would also have to commit to never sell bullion. The reality is that even with a yes vote the effect on gold prices may be nothing significant-and there may not be any effect at all.
Gold will likely continue to take its cues from the equities and currency markets. Although outside markets are working against gold right now, it does seem that gold has reached a level where it is finding some degree of equilibrium. Demand for physical gold at current levels appears to be picking up. This demand may well be what stabilizes the yellow metal in the coming months regardless of stocks or the dollar.