Gold prices are trading slightly lower this morning to kick off the Christmas holiday shortened trading week. Trading is likely to be very subdued this week, with the potential for light holiday volumes causing some erratic price action.
This week will be light data wise as well. Investors will get the latest reading on consumer sentiment today as well as personal income and outlays and the Chicago Fed National Activity Index. Tomorrow has a little more potential punch to it with the latest readings on durable goods orders, new home sales and the Richmond Fed Manufacturing Index. All markets will be closed Wednesday for the Christmas holiday. On Thursday, investors will get the latest readings on weekly jobless claims and MBA purchase applications. Friday is essential void of pertinent data scheduled for release.
In outside markets, the dollar index continues to hover above the 80 level and is threatening further upside on the daily chart. Should this prove to be the case, the stronger greenback could prove to be another formidable obstacle standing in gold’s way. After a failed probe of the 80 level, dollar shorts have been forced to cover which has also spilled fuel onto the fire. In light of the Fed finally taking action, the dollar may continue higher at this point.
Crude oil had been pushing higher in recent weeks but is beginning to look as if it is running out of gas. Weaker oil may also benefit the gold bears.
Perhaps most important of all, the stock market continues to march higher to new all time highs. We have stated before that this could be the key to gold’s future. It seems as if the rally in stocks will never end, and more and more people have now been sucked into the market as late-comers chase potentially higher returns in stocks. While it is hard to say how much longer this could continue, many do continue to feel that if or when the equities markets start to show signs of cracking, investors may seek out gold and precious metals as alternative places to put cash to work. Perhaps this could be seen in Q1 of 2014 or perhaps not.
In the meantime, it appears that many gold investors may be content waiting to see if prices make a fresh low. Although the market held it last week, the June lows in the $1182 area still seem to be a target for the bears. A breach below this level could start another large leg lower in prices, and could see prices target sub-$1000 levels.
