Gold prices are trading slightly weaker this morning as bearish outside factors continue to take their toll on the yellow metal. The dollar index is trading higher this morning while crude oil is trading sharply lower. Stocks are coming out of the gate and look poised to continue in their winning ways. All of these issues are potentially taking away from gold’s appeal as investors continue to look at higher potential returns elsewhere.
In addition to the key outside markets not doing gold any favors, the weekend saw an announcement that Iran has agreed to keep its nuclear program in check. A deal has been reached that would reduce economic sanctions against Iran in return for Iran pledging to cease its nuclear weapons development program. This news came as a surprise, and markets reacted accordingly. Crude oil was hit hard, and gold has been under pressure as well. It goes without saying that any diplomatic relations between the U.S. and Iran could potentially greatly reduce the risk premium in oil, gold and other assets.
This week will be lighter in terms of data due to the Thanksgiving holiday. Markets will get the latest readings on pending home sales later this morning, and will also see the latest data on housing starts as well as the Case-Schiller index tomorrow. Consumer confidence will also be released tomorrow followed up by consumer sentiment, weekly jobless claims, durable goods orders and leading indicators on Wednesday. On Thursday, U.S. markets will be closed for Thanksgiving but will reopen for Friday’s trade. The lower volume this week could add some volatility to markets, and some profit taking in stocks could potentially be in store before the Holiday.
As of this post, gold is trading well above the lows reached overnight in the $1225 area. This could be some quick profit taking by gold shorts, as well as some investors buying the dip. Gold remains in a bearish posture on the daily charts, and still looks poised for additional downside. The June lows around $1182 remain a likely target for gold on the downside.
Gold bulls will continue to look for any potential bullish catalyst to drive prices higher. As discussed, it may be hard for gold to gain any real traction until stocks undergo a further correction or the Fed does actually take some action with regards to its QE program. In the meantime, the market will continue to be driven by outside markets, bearish technicals and lack of bullish sentiment.
