The gold market, and several other markets are trading relatively flat here Monday morning to begin the new trading week. The gold market continues to suffer from a lack of a bullish catalyst, and although this can change quickly, right now it seems that the path of least resistance for gold remains lower.
This week will be busy for markets and investors. Markets will have the opportunity to digest the latest readings on PMI manufacturing, ISM manufacturing, construction spending, factory orders,beige book, ISM non-manufacturing, the ADP employment report, weekly jobless claims and the non-farm payrolls report for the month of May. This onslaught of economic data could potentially be market moving in gold and precious metals, although it likely will not have a huge effect on gold prices. The gold market will be looking towards other issues as well for any potential bullish or bearish catalyst.
The dollar index continues to stay above the key $80 level, and strong economic data could potentially push the greenback even higher and thus pressure gold and metals in the process. Not only will US economic data potentially drive the dollar and gold this week, but the much anticipated ECB meeting on Thursday could also prove to be a big market mover. It is widely expected that the ECB will announce stimulus measures when they meet this week in order to combat weak economic data in the region and the growing threat of deflation. Should the ECB make such a move, the Euro could remain under pressure and thus give the dollar index a boost thus potentially keeping the heat on gold and silver prices.
The non-farm payrolls data here in the US will likely be the biggest data point of the week. Consensus estimates are currently looking for an increase of 213,000 jobs with a slight uptick in the unemployment rate to 6.4 percent. Although at first glance it appears that the jobs situation is continuing to get better, it is important to keep in mind that the data is not entirely what it seems. The labor force shrank by a significant 806,000 in the month of April.
Stocks continue their winning ways, although they are now looking a bit more tired. Volumes have not been impressive as the markets continue to push higher, and this could possibly be a sign of a rally that is nearing an inflection point. It would seem that gold may potentially benefit should stocks start to falter, although no one knows when that may be and to what degree. For now, the trend remains lower in gold, and barring any developments, it seems that the yellow metal could have more downside to go before finding a meaningful near term bottom.
