Gold is trading near the unchanged mark in early trade today as crude oil rallies, stocks inch higher and the dollar index trades just above unchanged. Gold is likely seeing some profit taking today and a little back and fill trade following recent upside.
This week is a light one from a data perspective. Markets will get the latest data on MBA mortgage applications, as well as weekly jobless claims in addition to some other minor data points.
Over the weekend, China held its central planning meeting at which plans were discussed to promote economic growth. While projections for the Chinese economy are quite lofty compared to other areas of the world, the pace of growth is likely going to be the slowest in many years. Although plans being put into place to promote growth may provide a degree of comfort to investors, any further difficulties seen in China could potentially drive risk aversion.
For now, risk appetite appears to remain elevated and stocks may continue their recent march higher. While a lower low was made in the most recent bout of large-scale selling in equities, the current rebound in stocks seems to resemble the rebound seen following heavy selling late last summer. Whether or not stocks can return to all-time highs remains to be seen.
Thus far, the current strength being seen in stocks is not deterring buying in gold and silver. In fact, the recent strength seen in gold and silver in spite of higher stocks may be indicative of underlying bullishness and potentially higher prices.
Investors are also looking forward this week to the ECB meeting set for Thursday. The central bank may take further action in an attempt to stimulate its economy and could push rates further into negative territory. While the euro has seen a bit of a bounce in recent days, such a move by the ECB could potentially drive the currency lower while boosting the dollar. After seeing a strong decline recently, the dollar has been moving higher and recovering some lost ground. Further dollar strength could potentially weigh on gold and silver but does not appear to be much of a factor at current levels.
Gold appears to be gearing up for another leg higher in price and looks quite bullish from a technical standpoint. A test of the $1300 level could potentially be in store, and a push above that level could possibly see another significant leg higher in prices.
