Gold prices are slightly lower on Friday morning to cap off the trading week. Stocks, crude oil and the dollar index are all moving higher.
This past week was a relatively quiet one. Recent data released has been positive for the most part. Today, markets got the latest readings on both retail sales and consumer sentiment. Both data points came in better than expected. There appears to be a good degree of optimism going into the holiday shopping season.
The dollar index continues to be a formidable barrier to higher gold prices. The dollar is currently trading at four year highs and is not showing any signs of slowing down. The dollar index could very well be on its way to the 92 level or even higher. That level has not been seen since 2005. Conversely, there is a great deal of bearish talk surrounding the Euro. This comes as no surprise as the Euro zone continues to struggle with deflationary pressures and is attempting to fight a slowing economy through quantitative easing. Talk of the Euro reaching the 1.15 level or even the sub 1.00 level has been increasing.
Crude oil prices are not helping gold at all either. Since July, the price of crude has dropped swiftly and severely from over $100 per barrel to as low as $73 per barrel and change seen this morning. Many are wondering if the drop in oil prices is over or of there is more to come. In addition, the steep drop in oil could potentially signal more trouble to come. As oil prices drop, the fear of deflation increases. Needless to say, the notion of deflationary pressures and lack of inflation does not help the gold bulls.
Since bottoming out last week around the $1130 area, the gold market has attempted top rally. The market nearly reached its breakdown level of $1183 before losing steam. The gold bulls were not able to follow through on last Friday’s key upside reversal. After consolidating over the last few sessions, the gold market appears to be trying to head higher. A large reversal has been seen this morning as gold has gone from trading lower to trading several bucks higher. The $1183 breakdown area remains key near-term resistance. The gold bulls must make a solid close or consecutive closes above this level to negate the breakdown.
Demand for physical gold appears to be steady to higher. Current price levels appear to be attracting more physical buyers going into the holiday season. As the gold market is currently lacking a bullish catalyst, this physical demand could be what stabilizes gold around current levels.
