Posted on May 19, 2014
Gold prices are moving higher this morning to kick off the new trading week. The yellow metal has reclaimed the psychologically important $1300 level, although it does also appear to be lacking a true sense of direction in general. The gold market has seen relatively sideways trade as neither the bulls nor the bears have been really able to assert control at this point. The bears have now failed on multiple attempts to take prices lower below the $1280 support area and begin a new down leg. This would seem to indicate that dips in gold are being bought, and that the market may still possess some underlying strength. The daily gold chart is looking somewhat more encouraging as well, and this perhaps could potentially attract more buying interest in the yellow metal in the coming sessions.
Of note is the recent election in India in which the BJP party won. This could potentially pave the way for looser restrictions on gold in India-and is likely playing a role in gold’s recent move higher. In addition, the ECB has reported that central banks within the Euro zone have been coordinating potential gold transactions in order to reduce potential market volatility. The new agreement will go into effect on September 27th and last for a period of five years. “Gold remains an important element of global monetary reserves,” the ECB said in a statement. “The signatories will continue to coordinate their gold transactions so as to avoid market disturbances,” the central bank said. None of the central banks involved has any plans at this point in time to sell any significant amounts of gold. This would seem to reaffirm the importance of gold bullion within the monetary system.
This week is a light week from a data perspective. The markets will, however, get the latest FOMC minutes on Wednesday afternoon. In addition, there are a number of Fed officials speaking this week. Markets will also get the latest data on weekly jobless claims, PMI Manufacturing, existing home sales, leading indicators and and new home sales. The Fed minutes are likely to be the biggest potential market mover of the week-especially in gold.
Gold prices are forming a triangle on the daily chart as prices have been consolidating sideways. One has to wonder just how much longer bullion will go sideways before making a sustainable breakout in either direction. The market has been making higher lows, and given the way that gold prices have been defended at recent support, the bulls may have a slight technical advantage. Stay tuned…