Gold prices are slightly higher on Friday to end a holiday shortened trading week. There is no data being released today. This week is a tough one to gauge from a price action standpoint, as low volumes can make for very boring or even sometimes erratic trade. The gold market still appears to be trying to make up its mind as to what it wants to do next following the Fed’s decision to begin tapering its monthly bond purchases by $10 billion per month to start. Gold has been trending slightly higher the last few sessions however, the market has thus far been unable to put together an impressive looking rally. This seems to be some cause for concern for the gold bulls.
It seems that this could be a good time for investors to look at the bigger picture, and it is likely that is exactly what many are doing now. For one thing, the trading year is winding down in a hurry. Investors may look to make key changes in their portfolios at the beginning of the new year. The other issue is the fact that now that the Fed has begun tapering, we could be entering a very new phase in the economic cycle and no one knows exactly how markets may hold up with less help from the Fed. There are still those out there that question whether or not QE was truly any help at all to begin with.
With regards to the precious metals markets, the reality is that not much has changed from a fundamental standpoint. The economy is still not as strong as people would like, and the U.S. is still dealing with a number of fiscal issues that could prove problematic down the road. Gold was sold off in recent months on the notion that at some point the Fed would begin removing the punchbowl. Now that the process has begun, can gold put together a meaningful rally despite many feeling that the Fed tapering is very bearish for the metal? This remains to be seen, but gold does appear to be hanging on for dear life right now. The summer lows remain in play, and if breached would possibly signal another large leg lower for the yellow metal.
On the flip side, if gold can put together a sustainable rally here, then perhaps the gold bulls can turn the tide around. Thus far, the bull case has been lacking in any conviction. The next few weeks should give market participants a very good idea of the market’s intentions going forward.
