Gold prices are seeing small gains this morning to cap off the week. The gold market for now however, does appear to be fighting a bit of an uphill battle. The buying seen on Wednesday and Thursday appears to have run its course at least for now, and we’ll have to see if the bulls can muster a better effort or if the bears begin selling the recent rally in prices here.
The whole idea of a Janet Yellen run Fed has been bullish for stocks and risk assets. Yellen is known to be a staunch supporter of Ben Bernanke policies and has openly discussed her feeling that the Fed needs to continue to be extremely accommodating for the foreseeable future. During her senate confirmation hearing on Thursday, Ms. Yellen reiterated her thoughts on monetary policy.
The notion of easy money has driven stocks to new all time highs again. The stock market continues to appear “frothy” to many, but there is thus far no end in sight to the current rally. As the saying goes, “It is tough to fight the Fed.” Stocks could very well continue on this upside trajectory until such time as the Fed does in fact begin to act-and at this point when that may be is up in the air.
Following last week’s jobs data, there was speculation that the Fed could now taper as early as December. Many however, still feel that other recent data remains too weak for a 2013 taper and that the Fed will likely not act until sometime in the second quarter of next year. This notion of when the Fed may taper and by how much will likely continue to drive price action in stocks and other risk assets.
For now, gold continues to struggle as the idea of a potential end to QE takes its toll on the market. For now, gold appears to be simply lacking a real bullish catalyst to take prices decisively higher. It is quite possible that gold stays under pressure until stocks start to turn South. The recent bullish action in the dollar index and weakness in crude oil prices are not doing gold any favors either.
Gold is challenging its 9 day EMA today in the $1290 area. Should the market not be able to take this level out to the upside, the bears will likely pounce and try to take prices back for a re-test of the week’s lows in the $1260 area. A breach below this level and last month’s lows around $1251 would likely set the stage for another run at the June lows of $1182ish. The bulls need to take prices above the 20 day EMA which coincides with the $1300 level to begin to develop some momentum.
