Posted on February 09, 2015
Gold prices are slightly higher early this morning to begin the new trading week. Gold is being driven by risk aversion today, and some weekend developments may continue to drive precious metals throughout the trading week.
Greece remains the center of attention as new leadership attempts to renegotiate the terms of the country’s bailout package. Thus far, EU officials have rejected a renegotiation by Prime Minister Alexis Tsipras, who has stated that he plans to move forward with austerity roll-backs and plans to honor his pre-election pledges of raising the minimum wage and hiring more public workers.
Mr. Tsipras has also stated that Greece would not agree to a bailout extension, but would rather seek out a bridge loan in order to service its debt. The ECB has said that it will not allow Greek banks to access ECB credit through government bonds or guarantees. Eurozone finance officials will be meeting on Wednesday of this week to discuss the matter.
Any way you slice it, the situation in Greece appears to be headed for a bumpy road. While many believe some type of compromise will still likely take place, the chances of a Greek exit from the shared currency have likely risen. This may keep a floor under gold prices and other perceived safe haven assets until more clarity surrounding the situation becomes available.
While this week is lighter data-wise than last week, markets will still get plenty of information to ponder. The latest data on weekly jobless claims, retail sales and consumer sentiment can all potentially impact markets. Markets are still trying to decide on the potential impact of last week’s non-farm payrolls data. It appears that the stronger than expected data could pave the way for the Fed to move forward with the first rate hike which could take place as soon as June.
Gold has lost ground in recent weeks and the bears have gained the technical advantage. Gold prices could potentially see further downside, and a test of support in the $1220 area is a possibility.
Stocks have staged a significant rally from the recent lows, and another run at the previous highs could potentially be in store. Should this prove to be the case, gold may stay under some degree of pressure. On the other hand, should stocks begin to see selling once again around current levels, it could potentially point to a top in equities, and could potentially set the stage for higher gold prices.