Gold prices are trading relatively flat here today on Friday to cap off the trading week. This is not unexpected following the pop seen in gold prices yesterday. Stocks are trading slightly higher today while crude oil is also flat.
This past week has been an interesting one for the yellow metal. Gold had a tremendous week from a technical perspective, as the market made higher highs and higher lows throughout the week. The metal has thus far stopped just shy of the previous trading range breakdown level in the $1280 area. It is quite possible that this level is breached in the coming sessions.
Driving gold prices right now is the ongoing violence in Iraq. This violence has also caused oil prices to spike, and the mix of geopolitical unrest along with higher crude may keep gold prices well supported for the time being. Needless to say, Iraq is a huge oil producer and any potential threat to its oil supply output is not going to be taken lightly. This situation unfortunately could get worse, and it’s quite possible that investors start to shift some more money into safe-haven assets should that prove to be the case.
It was a relatively light week from a data standpoint. Markets got the latest readings on consumer sentiment, PPI, weekly jobless claims and retail sales. The data did not seem to have much of an effect on gold prices, as the market appears to be more fixated on Iraq and rising crude oil prices. The dollar index has been a bit on the softer side this week as well which may be boosting gold and silver. The dollar does, however, look poised for more upside and could potentially weigh on precious metals. Gold’s near term fortunes will likely depend upon whether or not stocks keep breaking records and whether or not the situation in Iraq is resolved quickly. Any type of turmoil in the oil rich Middle east not only can cause spikes in oil prices, but can also spook stock investors and trigger some selling.
The next few days will be key in gold. The metal must take out prior support in the $1280 area in a convincing fashion. If it fails to do so, the market does still have the potential to roll back over. If this level is breached, however, we could see more fresh buyers entering the gold market quickly. This could potentially take gold prices back above the $1300 level in short order with perhaps an initial price target in the $1320 area.