Gold prices are moving lower to begin the new trading week as the markets are breathing a collective sigh of relief as Greece and the EU have struck a deal to extend the country’s bailout package for another four months.
Last week, worries intensified over whether or not a a deal would be made in time. Friday was essentially a do or die day as far as finding a compromise goes, and the extension will likely support stocks for the time being. That being said, however, it is important to note that what has been accomplished thus far is not much-the underlying problem still needs a viable long-term solution that thus far remains elusive.
While gold may see further selling pressure in the near-term, the Greek debt situation and other geopolitical issues may potentially support gold. The ongoing Russia/Ukraine conflict continues to be a source of tension. Russia’s credit rating was downgraded to junk on Friday by Moody’s, and the country’s currency has seen significant downside pressure in recent months. Like the Greece/EU situation, the Russian conflict does not appear to be going away anytime soon. While gold prices have not shown much reaction based on the potential for escalation, should Russia continue to isolate itself the issue could have a significant impact on global financial markets.
Investors will have plenty to chew on this week as the U.S. economic data calendar is fairly full. Markets will see the latest data on existing home sales, consumer confidence, new home sales, the Case-Shiller home price index, weekly jobless claims, durable goods orders, CPI and Q4 GDP data. In addition, Fed Chairwoman Janet Yellen will be giving her semi-annual monetary policy testimony before the senate banking committee tomorrow.
While the gold market has plenty to digest this week, swings in gold prices may potentially be more volatile than usual while China celebrates the lunar new year.
Since peaking over the $1300 per ounce level in January, gold prices have been steadily trending lower. Some significant support levels have been breached, and the bears are in firm technical control at this point. Gold prices dipped below the $1200 level in the overnight session, and as of this post are sitting right at $1200. Today’s close may be key, as a close below this level may potentially signal more selling to come. The $1200 and $1180 levels may act as support, and a break below could potentially see gold prices dip back down to the $1140 level. Near-term resistance may be seen in the $1220 area.
