Gold prices are slightly lower in early trade to begin the new trading week. Stocks, crude oil and the dollar index are all modestly lower as well.
Markets are still digesting last week’s upbeat non-farm payrolls data which showed the U.S. added 215,000 jobs in March. The labor market appears to be strengthening, adding to speculation that the Fed could potentially hike rates again at its June meeting. Wage growth, however, remains a drag. Wage growth grew just 2.3 percent compared to a year ago, and this missing piece of the puzzle is a source for concern.
Investors will continue to monitor any commentary from the Fed very closely for clues as to the timing and pace of further rate hikes. Opinions remain mixed on the issue as being overly aggressive with rates could potentially halt growth and make investors anxious. On the other hand, if the economy is deemed strong enough for further hikes it is also demonstrative of underlying economic strength.
Although stocks are trading slightly lower as of this post, overall risk appetite remains healthy. The broad market SP500 is not far from all-time highs and could potentially challenge those highs once again. Barring any new significant news from China or elsewhere, the market seems poised to move higher and fresh all-time highs could potentially pave the way for another significant leg higher in prices. Ongoing strength in equities and risk assets could potentially make life difficult for the precious metals bulls.
This week, investors will get more data to scrutinize. Markets will get the latest readings on: Factory Orders, ISM Non-Manufacturing, Weekly Jobless Claims, Wholesale Trade and more. Perhaps the most highly anticipated data point of the week will be Wednesday’s FOMC meeting minutes. Investors will be looking for any clues or language that might provide more insight as to the central bank’s plans regarding interest rates.
Gold has been making lower highs recently and could potentially see a significant decline in the absence of any fresh bullish inputs. The market may be close to testing the psychologically important $1200 level, and a breach below could potentially send more bulls to the sidelines.
On the upside, gold may have to take out the recent highs in order to attract any significant, fresh buying interest.
Gold will likely take its cues in the near-term from any further clarity from the Fed regarding interest rates and from overall risk appetite or aversion.
