Gold prices are moving higher this morning as stocks and crude oil are slightly lower and the dollar index trades flat. Investors have now had a few days to try and digest Friday’s weaker-than-expected non-farm payrolls data and what it could mean for monetary policy. The fact that the jobs report was a miss could be an underlying bullish factor for gold and silver as the Fed may be forced to re-think its tapering plans. Although the stock market has recovered a great deal of its recent losses in the last couple of sessions, one has to wonder just how much might be left in the tank. Stock investors are cheering on the idea that the Fed will reduce its tapering for the time being, while seemingly ignoring the fact that the economy is showing some real signs of weakness. The big question remains-is this simply a bump in the road to recovery or is it the beginning of something bigger? Only time will tell.
The week ahead for gold could be an interesting one. Today is very light from a data standpoint, but tomorrow new Fed Chairwoman Janet Yellen will give her first semi-annual monetary policy testimony before the House Financial Services Committee. Fed officials Charles Plosser and Richard Fisher will also be speaking tomorrow on their economic outlooks. Wednesday will be another light day data-wise, while Thursday investors will get the latest readings on weekly jobless claims, retail sales and business inventories. Friday will cap off the week with consumer sentiment, industrial production and import and export prices.
The week in general is light on data but investors will be paying very close attention to Janet Yellen. Although no major changes in policy are expected, investors will want to get a feel for the new Chairwoman. The fact that a new person is heading up the Fed could make the gold market a bit more interesting. In addition, the gold bulls have gained the technical advantage recently, and are now within striking distance of taking out key overhead resistance in the $1280 area. A solid breakout above this level could attract larger buying interests into the gold market and we could see gold potentially start to run to the upside with the $1320-$1325 area becoming a possible target.
Although the emerging markets currency situation appears to have calmed-at least for now, investors will be paying close attention to any developments here as well. Any renewed currency strains in emerging markets, along with any potential stock weakness, could be the deciding catalyst for a further rally in gold prices.