Posted on January 01, 2015
Gold prices are moving slightly lower this morning to begin another holiday-shortened trading week. Crude oil is slightly higher while stocks and the dollar are lower.
This week may be uneventful and thin on volume as investors continue to enjoy the holidays. In addition, this week will be very light on data as well. Investors will get the latest readings on the Case-Shiller Index, Dallas Fed manufacturing, consumer confidence, weekly jobless claims, Chicago PMI, pending home sales, PMI manufacturing and ISM manufacturing. Markets will close early on Wednesday and all markets will be closed Thursday in observance of the New Year’s holiday.
Also in the news this week will be early elections taking place in Greece. A change in government in the country could potentially roll back several of the reforms that have been implemented to bring the country back from the edge of financial disaster. The snap elections caused the country’s stock market to drop sharply and also pressured bonds. Greek bond yields climbed to 9.12 percent, nearly reaching the year’s high of 9.21 percent. The vote also pressured Italian and Spanish bonds as well. These elections will likely be closely watched by other EU members and investors alike, and have the potential to move markets.
Looking into the new year, gold will likely be driven by the same underlying factors. These factors include stronger stocks, lower crude oil, currency markets and the Fed. The first part of the new year may prove to be very interesting as investors will decide whether to stick with stocks or whether to begin reallocating some assets. Stocks do appear to be headed on another leg higher at this point, but one has to wonder just how much more the market may have left in the tank given the notion of rising rates. As has been the case for some time, stronger stocks may limit buying in gold and the precious metals complex while weaker equities may potentially drive buying interest in the sector.
Gold prices appear to have found some degree of equilibrium around current levels. The market has been making higher swing lows which could potentially be bullish, and recent support levels have been defended. In addition, volumes have picked up around the lows which could potentially be indicative of larger market players accumulating the metal on dips. The market has essentially been stuck between $1140 and $1240 per ounce, and will likely tip its hand in the near future. Judging by behavior the market has exhibited recently, gold prices may potentially try to break out of this recent range to the upside.