Gold prices are slightly weaker on Monday morning to begin the new trading week. Stocks are moving higher once again today, as the SP500 makes what may be its final push to print the 2000 level.
The U.S. dollar index is also continuing its push higher as the Euro weakens. ECB President Mario Draghi has sounded very much on the dovish side recently, and it appears that the central bank may be gearing up for additional policy action. Further easing by the ECB may weaken the Euro further while supporting the dollar. The notion of additional stimulus is bullish for stock markets as well. Both of these issues could potentially provide roadblocks for the gold bulls. Draghi’s recent remarks are in contrast to the tone being heard from the Fed. The Fed appeared to sound more on the hawkish side of the ledger last week between the release of the latest Fed minutes and commentary from Jackson Hole, Wyoming. The dollar index staged a significant upside breakout last week, and further gains may be seen in the greenback.
The gold market will get more information to chew on this week. Investors will get the latest data on PMI services flash, new home sales, durable goods orders, consumer confidence, Richmond Fed manufacturing, GDP, weekly jobless claims, pending home sales, Chicago PMI and consumer sentiment. Of particular interest this week will be the durable goods data. Investors have begun to question how businesses are faring in the current environment, and looking at how these businesses are or are not spending money may give some good clues as to the health of these businesses. The weekly jobless claims will also be a highlight, as the Fed seems to be a bit divided over the health of the labor market. The labor market, it appears, will play a key role in the Fed’s determination to raise rates at some point.
The gold market will also continue to watch world headlines. Thus far, the metal has not caught much of a bid based on its perceived safe-haven status. Markets have continued to shrug off many of the current geopolitical conflicts as risk appetite has remained somewhat intact. It is worth noting, however, that bonds and notes continue to be bought. Interest rates continue to drop, and we would expect that bonds and stocks will not move higher together indefinitely. Gold is currently trying to hold support in the $1280 area, and a failure at this level could potentially send the yellow metal to $1240ish in a hurry.
