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    JM Bullion Weekly Market Review (1/17/14)

    Gold prices are moving a bit higher Friday to end a fairly uneventful trading week. Although gold is up nearly $8 per ounce as of this post at $1247.80 per ounce, the gold bulls have thus far failed to take prices above some key resistance in the $1255 level. Now, gold has been on a nice uptrend on the daily chart since retesting the June lows and holding. This hold likely forced some short covering in the yellow metal and some fresh buying to ensue. In addition, demand for physical gold has remained robust and this has also helped the metal move higher and gain some lost ground back. The question now is-does this rally have legs?

    This past week saw little overall movement in the price of gold even with a fair amount of data being released. Anyway one slices it, the economic data is showing improvement. Manufacturing, factory orders, housing-they all appear to be firmly on the mend. Is this a big negative for gold? Not necessarily. Gold can potentially be in high demand in a soft economic environment or a sizzling economic environment. After trending higher in recent weeks, the market looks a bit undecided at this juncture. This could be for a number of reasons. Gold was bought on Monday during the large equity sell off but equities then simply recovered their losses over the next few days.

    At this point, stocks appear poised to continue their winning ways. This could work against gold as investors chase yield. In addition, one of the key data points this past week was the release of the Consumer Price Index. This inflation gauge showed that inflationary pressures remain quite subdued-and this could also be working against the yellow metal. Many felt this week would be a very key week in the gold market with all of the data coming out. Unfortunately, we do not have a much better idea about gold’s intentions than we did a week ago. It is likely that many large and small players alike are awaiting the FOMC meeting later this month before committing to a position in gold either way. This would also help explain gold’s range-bound trading activity this week.

    A break above the recent highs in gold sets the stage for more short covering and more fresh buying entering the market. This could take gold prices very quickly to the $1294.70 area and perhaps a test of the $1300 level. The longer gold takes to make up its mind at current levels, however, the greater the likelihood that the bears retake control of the market and start driving prices down again. If the market does not hold $1220 on the downside then another retest of the June lows could ensue.

    Disclaimer: All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.

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