Gold prices are sharply lower this morning to begin the new trading week as a stronger dollar index and higher equity markets take their toll.
The dollar index may in fact resume its uptrend this week after seeing some profit taking and a pullback in recent trade. Should this prove to be the case, gold may once again run into a roadblock. Dollar strength in recent months has likely played a large role in gold’s weakness, and may continue to do so.
Speaking of the dollar, the euro may continue to weaken against the greenback as ongoing negotiations between Greece and the EU do not appear to be going anywhere. The shared currency could potentially hit parity with the dollar anytime now, and some feel that the currency may fall to as low as $.80.
While the uncertainty surrounding a potential Greek exit could potentially boost gold, that potential boost may be largely offset by dollar strength.
Stock index futures are sharply higher this morning to begin a holiday shortened trading week. Investors will, however, get plenty of data to chew on this week. Data set for release this week includes: Pending home sales, Dallas Fed Manufacturing, Case-Shiller Home Price Index, Chicago PMI, consumer confidence, PMI and ISM Manufacturing, factory orders, weekly jobless claims and the ADP employment report. The largest data point of the week will be released Friday when the latest data on non-farm payrolls is released. Markets will be closed in observance of Good Friday, and investors will have to wait until Monday to react to the data.
Due to the markets being closed Friday with such a large piece of data being released, volatility may be seen across asset classes this week. In addition, many are currently enjoying Spring break, and trading volumes may be lighter than usual.
The gold bulls appear to be fading once again, as has been the case in the market for some time. The inability to follow through on any rallies may be a good indication of underlying weakness, and gold prices may yet have further to fall before finding a solid, long-term bottom. The gold market has fallen back to the $1180 area, which previously acted as support. A breach below this level would likely see gold prices retreat back to the $1140 area, and possibly much lower. Sub $1000 per ounce gold is still thought by some to be in the cards, and the market still is lacking a real bullish catalyst.
Markets will watch data closely and listen carefully for any commentary from Fed officials. The first rate hike appears to be coming in June or September, and strong data will likely increase the odds of a hike coming sooner rather than later.
