Gold prices are seeing a nice bounce today to end the trading week as some short covering takes place and bargain hunters wade back into the market. The gold market certainly has no shortage of issues to contemplate these days, and many see gold's current weakness as somewhat surprising given the current geopolitical landscape.
The situation in Ukraine is still a very important issue that could potentially escalate at any time. Markets, however, have thus far shrugged off the potential for additional tensions as the situation has so far remained somewhat calm and wide spread violence has not been seen. The U.S., the EU and Russia are now in a sanctioning war of sorts. The U.S. has placed stiffer economic sanctions on Russia and the EU will likely do the same. Russia, for its part, has done some sanctioning of its own and has slapped sanctions on some top U.S. officials. Unfortunately, this could go on for some time. It is quite likely that markets will not really begin to pay attention again unless there is an escalation in violence or other developments. Russian markets have suffered some fairly severe consequences thus far, and with additional sanctions one has to wonder just how long Russia can hold out economically.
This past week saw Janet Yellen and the Fed make comments that were considered by many to be less dovish than previously thought. Stocks sold off on the comments on Wednesday, but have since recovered. The Fed Chairwoman alluded to the fact that rates could rise faster than expected-and we could see the first rate hike by Spring of 2015. Needless to say, gold and silver investors took this as a bearish piece of news.
Gold prices dipped down to support in the $1320 area yesterday, and are bouncing today. It is worth noting from a technical standpoint that gold prices did break an uptrend line, and are in danger of seeing further technical weakness. The next several sessions will be very important for the gold bulls as buyers need to step up now to stem the current bleeding. Although things can turn on a dime, it is likely a bit concerning for the bullish camp that gold has not been able to maintain strength in light of the current situation in Ukraine. One has to wonder if this is a sign of deeper underlying weakness in the gold market.
The dollar index is back above the $80 level, and will be closely monitored as well. Should the dollar strengthen further based on the notion of rising rates, gold could see some additional selling pressure.
