Gold prices are moderately weaker on Monday morning to start the new trading week as stocks get the week off to a strong start. It seems that investors are once again shrugging off the current geopolitical situations being seen in several places. Risk appetite remains fairly high, and as long as it does the precious metals markets may have trouble putting together any meaningful rallies. This seems to have been the case for some time, as gold has tried to rally numerous times only to fail.
The yellow metal as of this post has once again lost the psychologically important $1300 level again and could potentially see further downside. While it is difficult to imagine gold going a lot lower given the current geopolitical backdrop, anything is possible and the fact that the bulls have not been able to take prices higher given the current state of geopolitical issues may be demonstrative of underlying weakness. Also pressuring gold and precious metals is a dollar index that seems to want to try and go higher.
This week will be a fairly light week from a data perspective. Markets will see the latest data on the housing market index today. Tomorrow, markets will get the latest reading on the consumer price index as well as the latest housing starts data. On Wednesday, the FOMC minutes will be released. These FOMC minutes always have the potential to be market moving as investors look for clues from the Fed about its economic assessment as well as monetary policy going forward. Thursday will bring the latest weekly jobless claims data as well as PMI manufacturing, the Philly fed survey,existing home sales and leading indicators. On Friday, Federal Reserve Chairwoman Janet Yellen will be giving a speech from Jackson Hole, Wyoming on the labor markets. The Kansas City Fed’s annual Jackson Hole meeting this week will likely be closely monitored by investors. Between this meeting and the release of the FOMC minutes, investors will likely be watching closely for any signs of changes in monetary policy-particularly any clues about an interest rate hike.
The notion of rates moving up sooner than expected has been a source of discussion recently. With the economy continuing to heal, and even some signs of an improving labor market, one has to wonder at what point the Fed will decide to act. It will be interesting to see how stocks hold up if and when the Fed does give clues about a rate hike. Although many have been calling a top in stocks recently, the market seems very resilient and looks to want to retest its highs again. Should this be the case, it will likely prove to be another significant roadblock for gold and precious metals. On the other hand, should the notion of a rate hike cause stocks to really start to sell-off, gold and precious metals could potentially benefit from asset reallocation.
