Posted on September 29, 2014
Gold prices are seeing some light buying activity thus far today as stocks opened the session weaker. The stock market has been exhibiting a lot more volatility lately, and one has to wonder if this volatility is here to stay. While it is still too early to call a top in stocks, sometimes tops or bottoms may be marked by increasing volatility such as we are seeing the last several sessions. On the other hand, this could also prove to be nothing more than a buyable dip. Time will tell.
Although gold is slightly higher thus far today, the market still appears to be largely lacking in interest. The longer that gold prices hang around current levels, the more likely we may see a test of the $1200 level and possibly a break lower. It may take considerably more than increasing stock market volatility at this point in order to ignite a sustainable rally in bullion.
Markets and investors will have plenty to chew on this week from a data perspective. Today, investors will see the latest data on Pending Home Sales and the Dallas Fed Manufacturing Survey. Tomorrow will bring the latest reading on the Case-Schiller Housing Price Index as well as Consumer Confidence and Chicago PMI. On Wednesday, there is a lot more manufacturing data with the release of ISM Manufacturing and the PMI Manufacturing Index. Wednesday will also bring the ADP employment report as well as Construction Spending and Motor Vehicle Sales. On Thursday, investors will see the latest readings on Weekly Jobless Claims, the Challenger Job-Cut Report and Factory Orders. Friday will wrap up the data week with the release of NON-Farm Payrolls data fro September, the PMI Services Index and ISM Non-Manufacturing.
With this amount of data set for release, any large disappointments could potentially add to increasing investor angst. While this could potentially fuel more asset rotation, it remains to be seen if it will be enough to drive more buying interest in precious metals. The rally in the dollar index continues to be a potential barrier to higher gold prices, and thus far the rally in the greenback looks like it could have a significant amount of room to run.
Gold has remained subdued in light of increasing headline risk, and one has to wonder at this point if increased risk aversion will drive interest in the metal. For now, the trend remains lower and the bears remain in control until proven otherwise. There has been a significant amount of chart damage inflicted on gold, and it will take some considerable upside to repair the technical damage.