It has been a relatively quiet week for gold as the market continues to look bullish while prices consolidate. Prices are a bit weaker to start the day session on Friday as investors take some profits after recent gains and the market awaits further inputs next week.
The gold market did not move a lot this week trading in essentially a $40 dollar or so range. It did however, have a fair amount of data to digest. Markets got the latest readings on September non-farm payrolls data, weekly jobless claims, construction spending and more. The biggest data point of the week was the non-farm payrolls data. The September numbers were a disappointment as the economy added 148,000 jobs while consensus estimates called for 185,000. This weaker than expected number will likely add to already increasing speculation about if and when the Fed may begin to pull back on the throttle a bit with regards to its bond purchases.
It is quite likely that gold has a quiet trading day today to wind the week down. Investors are already looking ahead to next week as numerous potentially market moving reports will be released along with the FOMC meeting announcement set for release on Wednesday. The FOMC announcement will likely dominate the headlines for the week. Investors are anxious to see the Fed’s assessment of the economic damage done by the recent U.S. Government partial shutdown.
Due to the trend of weakening data recently, continuing struggles in the labor market and the partial government shutdown, it is now widely expected that the Fed will hold off on tapering until at least the middle to end of Q1 2014. Perhaps next week’s announcement will provide some additional clues as to the potential timing of a pullback in stimulus.
The dollar index will likely continue to play a key role in gold price behavior. The index is currently trading at the lowest levels since February and is threatening further downside. If the dollar index loses the 79 level on the charts, it could potentially head significantly lower and thus potentially drive gold prices higher. Gold in the meantime is maintaining trade above its 9, 20, and 50 day EMA’s.
The $1375 area still appears to be an initial upside target that will potentially be hit next week. Gold now has decent support in the $1325 area and as long as price remains above this level gold will likely continue to build on its recent bullish posture. In addition, weaker than expected data and indications from the Fed about continuing their bond purchases for the time being will likely support gold prices.
