Posted on July 21, 2014
The gold market is moderately higher this morning and as of this post is up about $6 per ounce as stocks are a bit weaker. The market will likely be headline driven for the foreseeable future as traders and investors watch the news for any further developments in several different ongoing geopolitical crises. The current geopolitical landscape has, however, only appeared to have a limited impact on the gold market. Gold saw a spike in prices last week, for example, following the downing of a Malaysian jetliner by a surface-to-air missile. That trade seemed to be somewhat quickly unwound, as the market finished well of its highs following the spike in prices and then lost some decent ground on Friday. Of course, things can escalate further, unfortunately, but for now it also seems like gold and precious metals are more focused on the macroeconomic outlook and physical demand trends.
This week will be another relatively quiet week for markets and investors from a data perspective. There is no major data being released today. Tomorrow, markets will get the latest readings on CPI, Existing Home Sales and Richmond Fed Manufacturing. Thursday will see the latest data on weekly jobless claims, PMI Manufacturing Index Flash, the KC Fed manufacturing Index and New Home Sales. Friday will see the release of the latest durable goods orders.
Tomorrow’s CPI data may be watched closely by precious metals investors, but likely will not have a huge impact on prices. All in all, according to the Fed’s preferred measures, inflation appears to be very much in check even though we did see an uptick last month on higher energy prices.
Markets will be watching the stock market closely this week once again for signs of exhaustion. Some have been calling a top in the equities market at this point, and this type of chatter seems to be getting louder. Of course, price will be the only and final determinant of whether or not these market calls prove to be correct-but gold and other assets will be paying attention. The stock market has exhibited some additional volatility recently-although volatility in general remains quite low.
The market saw a very strong option expiration Friday last week, and we will see if it can continue its resilience. Should the market continue on its path higher, it is likely that the current rally in gold prices will once again come under pressure as investors seek yield elsewhere and risk appetite remains high. For now, gold may see resistance in the $1325.5-$1325.9 area and at last week’s high of $1340ish. Support may be seen at the $1300 level and at last week’s low around $1292.6.