Gold is moving lower this morning to begin the new trading week as stocks rise modestly, crude oil sinks and the dollar index declines.
Gold is continuing to lose ground following last week’s FOMC meeting announcement in which the Fed indicated that a December rate hike is very much in the cards. Gold is now back within its prior trading range and could potentially be headed lower as expectations for a 2015 hike increase.
While gold had rallied in recent weeks on the notion of the central bank perhaps holding off on its first rate hike in years, the Fed appears to be intent on hiking before the year is over. This is not surprising, after all; the Fed had been discussing a rate hike before the end of the year for some time.
While markets perceived economic troubles in China and elsewhere as possible reasons the Fed would not move until 2016, the central bank had a decidedly hawkish tone in its recent comments and it seems rates are going to rise in spite of these troubles.
This is especially noteworthy given the fact that China continues to provide economic stimulus and the ECB is also standing at-the-ready for further quantitative easing to try to bolster economic activity.
Gold is currently seeing some long liquidation and investors are likely looking for other reasons to justify long positions. Gold has, however, been making higher lows in what could potentially be considered a bullish technical indication. The question now becomes: “Will the bulls step in again and buy the current dip in gold?”
Markets will have plenty of data to consider this week. Investors will get the latest readings on: PMI Manufacturing, ISM Manufacturing, Factory Orders, PMI Services, The ADP Employment Report, Weekly Jobless Claims and the Non-Farm Payrolls Data for October.
Friday’s jobs data could potentially give the Fed something to think about. Following last month’s disappointing 142,000 jobs number, markets will be looking for a rebound. While consensus estimates are looking for 190,000 jobs added, another large miss could reignite talk about the Fed holding tight on rates for now. A solid number, on the other hand, will likely add to speculation that lift-off will take place next month.
The question may be: “How will stocks react to higher rates?” As stocks have recovered, gold has declined. Perhaps a drop in equities (should one occur) may reinvigorate the precious metals bulls and drive buying in gold enough for a more sustainable rally.
