Posted on September 08, 2014
Gold prices are seeing more follow through selling pressure today as the dollar continues its ascent and the price of oil slides. Since breaking support in the $1280 area, the gold market has not been able to put together any type of rally and appears to be headed for lower support in the $1240 area.
The gold market will, however, have some things to pay attention to this week. Of particular interest is the increasing support for Scottish independence. The notion of Scottish independence has pressured the British Pound. Should a move for independence cause the dollar to strengthen against other currencies as well, gold may continue its slide.
The greenback has been moving higher in recent weeks following an upside technical breakout. The dollar has been supported by ongoing struggles with deflation in the Euro zone as well as an improving economic outlook here in the U.S. The notion of higher interest rates is also supporting the dollar. This dollar strength has been causing all sorts of problems for the yellow metal, and it is unlikely that gold will be able to stage any significant upside as long as the dollar continues to rise at its current pace.
Headline risk in global markets appears to have decreased-at least for now. Given the fact that gold could not rally in light of current geopolitical headwinds, one has to wonder just how much investors may look to gold as a safe-haven should the geopolitical landscape deteriorate.
The economic calendar for this week is on the light side. Investors will get the latest readings on retail sales, weekly jobless claims, consumer credit and consumer sentiment. As usual, the stock market will also potentially play a role in gold’s fortunes or lack thereof. The SP500 index continues to hold the 2000 level, and may be consolidating before attempting another leg higher in price. This stock strength has also served as a roadblock to higher gold prices, and thus far does not show any real signs of cracking.
According to data from the CFTC, large speculators continue to cut bullish positions in gold and silver. The addition of gross short positions in the metal is also considered bearish, and lower gold prices could very well be in the making. Should the last immediate level of support in gold at $1240 not hold, the gold market could potentially see another significant leg lower in prices. In fact, $1000 per ounce gold cannot be ruled out. Gold prices will likely continue to be driven by currency markets and risk appetite.