Gold prices are under some pressure this morning as stocks make new all time highs and interest rates rise. The price of gold may not fall too far today, however, as the U.S. dollar index is under some pressure as well this may limit the selling in gold. In the news today is the Chinese Yuan plummeting versus the U.S. dollar. This Yuan weakness makes buying gold which is denominated in dollars more expensive for Chinese buyers. The fact that China is the world’s largest gold consumer is a cause for concern for the gold bulls.
In addition to the Yuan falling, the situation in Ukraine also remains at the center of attention for gold buyers. The country is on the edge of financial collapse, and it remains uncertain if aid will arrive in time. In addition, the potential for increasing violence still looms large, and investors are likely to remain skittish until there is more clarity on the situation.
Q4 GDP was revised sharply lower today to 2.4%. This downward revision was expected, and markets appear to be shrugging it off completely at this point. Consumer sentiment, pending home sales and Chicago PMI all showed gains today. All in all, the trend in data remains positive. After seeing some rough patches recently in the data stream, Fed Chairwoman Janet Yellen has reiterated the Fed’s plans to continue the process of removing its monetary stimulus. Apparently the Fed feels that the economy is strong enough to warrant more stimulus removal, and stocks continue to march higher likely because of this.
Gold prices have held up well despite recent stock strength and it will be interesting to see if the gold bulls can hold the recent gains in the yellow metal. The metal has been trending higher on the daily charts, and appears to be in a consolidation phase currently. $1340ish remains overhead resistance currently while $1300 will likely act as support. The metal may be biding its time to see just how far stocks can continue their advance. Physical buying in gold appears to be steady, but it is possible that physical buyers may become more interested if the market can begin another leg higher out of this current area of price congestion. Prices traded in just over a small $25 range this week, which could potentially indicate an imminent breakout either up or down. The bulls currently have the technical advantage, however, and it seems that more upside in gold is a possibility unless the bears can prove otherwise.