Posted on August 18, 2015
Gold saw gains today to begin the new trading week as safe haven demand and technical buying drive price action. The gold bulls are attempting further upside follow through and more shorts may begin to get nervous.
This week could be very important from a data perspective and could potentially influence the upcoming Fed decision on rates. The data stream did not get off to the best start today, as the Empire State Manufacturing Index came in much lower than anticipated. Investors also today got the latest reading on the Housing Market Index which was inline with market expectations.
Tomorrow, investors will see the latest reading on Housing Starts. Wednesday will bring the latest on MBA Mortgage Applications and the Consumer Price Index. Thursday markets will get to digest more economic data with the release of weekly jobless claims, existing home sales and leading indicators. Friday will see the release of the latest PMI Manufacturing Index Flash.
The last FOMC meeting minutes are set for release this Wednesday and could potentially have a large effect on gold and other markets. There is much ongoing debate about the Fed’s plans regarding interest rates and whether or not a hike will be seen as soon as next month. Some analysts believe the Fed may hold off until the last minute, effectively making a “game-time” decision on rates next month. This would give the central bank another month’s worth of data to examine and may potentially sway their decision.
While a rate hike by the Fed next month seemed almost a certainty, recent volatility in China, as well as the devaluation of the yuan this past week has many wondering if the Fed may now elect to stay on hold. Recent data coming out of China has also shown signs of weakness and should further selling be seen in Chinese stocks it may spill over into other global equity markets.
Gold has likely seen some benefit recently from weakness in U.S. stocks, although the market appears to be clawing its way back currently. Should stocks roll over, it may add to overall risk aversion and some of that capital being taken off the equity market table could find its way into gold and other precious metals.
Gold may see limited upside from current levels until more is known about the Fed’s intentions. On the other hand, the worst of the selling may also be over and gold may have found a near-term bottom.