Gold prices are moving slightly higher on Monday to begin the new week as some short covering and bargain hunting take place following Friday’s move lower. Stocks are retreating a bit today after another record high, while the dollar index trades flat and crude oil prices move lower.
Over the weekend, lousy economic data out of China has given some investors reason to sell. Stocks along with many commodities are down after China reported a drop in exports and a trade deficit. Experts were looking for a rise in exports along with a surplus in trade.
The situation in Ukraine continues to linger in the background. Tough rhetoric from Russia along with increasing concern here in the U.S. and Europe will likely keep this in the headlines for the foreseeable future. The Crimean region will be voting on possible secession from Ukraine on March 16th. Although the situation appears to be calmer than a week ago, it could also flare up at any point and may keep risk assets from falling too far until a long term solution or agreement is reached.
This is a fairly light week data-wise here in the U.S. The economic highlights of the week will include weekly jobless claims, retail sales data, PPI and consumer sentiment. While all of these can potentially affect the gold market, precious metals investors are likely to remain focused on the situation in Ukraine and how stocks behave. Gold prices remain in an uptrend on the daily chart but have been starting to look a bit fatigued as of late. Gold prices continue to consolidate around the $1340 level and have thus far been unable to break overhead resistance in the $1360 area. While anything is possible, prices are not likely to continue moving sideways forever. We suspect the gold market will tip its hand at some point in the near future.
Crude oil prices have remained stronger while the dollar continues to get weaker. These factors could potentially help tip the scales in the bulls’ favor. Demand for physical gold has remained relatively consistent, however, it does appear that many investors are perhaps waiting to see if stocks can continue their march higher before reallocating more assets. While many expect this time will come, no one can say for sure if it will come or when it might come. It does seem though, that the stock market could hold gold’s immediate future in its hands. If stocks start to crack, gold could take off to the upside as investors look for places to put cash to work. If stocks keep going up, up and away, gold may have a hard time breaching overhead resistance for the time being.
