Posted on September 12, 2014
Gold prices are drifting slightly lower this morning as the yellow metal is once again seeing a support level fail. Gold prices have fallen nearly $40 per ounce this week, and it does not appear that the selling is over. The fact that gold is now trading below the June lows could potentially indicate further downside to go. It certainly seems as if the $1200 level is in the cards in the coming weeks. This level is very important as the gold bears have tested it on two previous occasions. The market has held both times, but a third time down may prove to be too much for the gold bulls and we could see a technical downside breakout in gold prices. This technical breakout to the downside could potentially take the price of gold to the $1000 level in short order.
This past week has been somewhat light on the economic data front. Next week, however, is full of economic data releases as well as the FOMC announcement on Wednesday. The FOMC announcement will be followed up by a press conference with Fed Chairwoman Janet Yellen. Investors will likely pay close attention to Ms. Yellen for clues as to the Fed’s assessment of economic conditions as well as the central bank’s plans on monetary policy. It is still widely believed that the first rate hike will come sometime in the middle of next year, however, given strength in much of the data seen in recent weeks some believe the Fed will act sooner.
The dollar index and crude oil prices continue to add to the overall bearish tone surrounding gold. The dollar index has continued to move higher following an upside technical breakout. Fueling the greenback is a strengthening economy as well as weakness in the Euro zone. In addition, the notion of Scotland breaking away from the U.K. has kept the pound under some pressure against the buck. Crude oil prices continue to trend lower, and are approaching the $90 per barrel mark. This near $15 per barrel slide in black gold is not helping the precious metals markets at all.
Last but not least, the equities markets are still trading sideways for now and could potentially be consolidating before another leg higher. Overall risk appetite remains high as the cease-fire in Ukraine continues to hold up. Markets have shown an amazing ability to shrug off any potential negative news, but one must wonder just how long investor complacency can last.