Gold is trading flat to kick off the new trading week. The yellow metal thus far today is not showing much enthusiasm even in light of a weaker dollar index and higher crude oil prices.
Not to beat a dead horse, but this week will be all about the FOMC and whether or not we see any action from them. Many feel that given the recent U.S. Budget deal along with better-than-expected data the likelihood of the Fed tapering this week has increased substantially. The question seems to be if the Fed will be willing to rock the boat so to speak right before the holidays going into the end of the trading year.
One can certainly make arguments for tapering and against tapering. It seems however, that the path of least resistance may be waiting until sometime in Q1 to begin winding down its operations. Whenever the Fed does decide to act, it is also quite possible that the market reaction could be quite muted at this point. The notion of whether to taper or not to taper has been discussed at length for some time now, and it is quite likely that markets have already priced in this move by the Fed. That being said, tapering could cause some selling to hit equities and other risk assets and could possibly actually benefit gold at this point, but a high level of volatility may not be seen as many expect.
While the FOMC is certainly the big enchilada of the week data-wise, markets will have plenty of other things to consider. Today brings Empire State Manufacturing data as well as PMI Manufacturing data. Industrial production comes out as well. Tomorrow investors will see the latest reading on the consumer price index as well as the housing market index. The FOMC announcement as well as the Chairman’s press conference will be held on Wednesday. Thursday brings the latest Philly Fed survey, existing home sales, weekly jobless claims and leading indicators. The Kansas City Fed Manufacturing Index and Q3 GDP data round out the week on Friday.
Friday is also quadruple witching day, on which equity options, equity futures, equity index options and single stock futures expire. This can make for some volatile and erratic trade and is worth noting.
Gold continues to trade below its key moving averages, and the bears are still in firm control of the market. Gold does however, look to be holding current levels. It is possible that we see either very quiet trade going into the Fed on Wednesday, or we see a short covering rally ahead of the Fed. This meeting will likely determine gold’s direction for the near-future and many may just elect to take a wait and see approach.
