Bulls Taking A Break Today

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The gold market is a bit lower in mid-morning action Friday. The spot price is down by $3 per ounce in quiet trade thus far. Despite the day’s declines, however, the market remains very close to the $2000 mark and will likely test this area early next week. The combination of an increasingly dovish Fed and bank worries may keep gold well supported in the weeks ahead.

 

Recent economic data has also been bullish for the yellow metal. Durable Goods Orders, released earlier today, showed a decline for the fourth consecutive month. As weakness in the manufacturing sector gains steam, more investors may become worried over the possibility of a recession coming. Not only that, but a slowing economy may also mean that the Fed is at or very close to the end of its tightening cycle. The Fed did raise interest rates again this week by 25 basis points, as expected, but also signaled it would not be hiking rates again any time soon.

 

The end of the current rate hiking cycle may not only provide investors a sense of relief, but it may also give them a degree of clarity that had been lacking for some time. This clarity may allow investors to make moves they otherwise would not and could put gold and other markets onto sustainable trajectories for the months ahead. If the Fed were to signal that they may see the need to start cutting rates again, look out. Gold and stocks could see a significant upside while the dollar gets clobbered. Whatever the case may be, the Fed and its plans for rates could hold the keys to higher gold and higher equities. For the time being, the $2000 level will act as an important resistance barrier for gold.

 

If the gold bulls can take out the $2000 level on a closing basis, the stage could be set for a rapid rally higher that could see gold back at all-time highs in a short period. If the bulls fail to take out this level, however, the bears could gather some strength and potentially drive the market lower to the $1900 level. The bears will not have anything of substance going until they take out $1800 on a closing basis. Within the market not far from previous all-time highs at this point, logic could suggest that a test of those highs may be seen before any significant downside is. Whatever downside does come along may not be enough to deter the bulls from taking the market higher over time. Any significant dips are likely to be bought aggressively, for the time being, and this may keep the metal from falling too far too fast.

 

The next several sessions may be critical for gold as it attacks the $2000 level. Given the current backdrop, however, the market could find reason to move higher and do so quickly if another bank runs into trouble or signs of contagion appear.

Gold Losing Ground Monday as Powell, Jobs Data Awaited

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The gold market is lower in early afternoon action Monday. With two key pieces of economic data set for release this week, the market was comfortable treading water for much of the day. Prices have slipped in recent hours, however, and spot gold is now down by over $11 per ounce.

 

Fed Chairman Jerome Powell is set to speak before Senate and House Committees tomorrow and Wednesday. His testimony on monetary policy could provide further clues about the Fed’s plans going forward and its economic outlook. Whether the Fed will continue raising interest rates, and if so by how much, is the topic of much debate in financial circles. Any strong clues provided by Powell over the next two days could be market-moving.

 

In addition to Powell’s testimony, the markets are also awaiting the jobs report set for release Friday. Non-farm payrolls are expected to show a rise of 225,000 jobs following the massive rise of over 500,000 for January. If the data sees a large miss to the downside, it could move markets as the doves start to buy based on hopes for a less-hawkish Fed. If the jobs data is a strong beat, it could have the opposite effect. A stringer-than-expected jobs figure could send the markets lower as worries over an aggressive Fed take hold. A number that is in line with expectations is unlikely to move markets much, if at all, and may give investors reason to stay patient and wait for the Fed’s next meeting on rates.

The gold market appears to be in a bit of a holding pattern right now. Since the bulls lost the $1900 level a few weeks ago, the metal has not made any major moves up or down. If the bulls were to lose the $1800 level, the trajectory of the market could change drastically. For the time being, both the bulls and the bears appear to be somewhat comfortable with prices in the mid-1800s.

 

With 2023 now well underway, the markets will want to see clear action and intention from the Fed. Recent inflation data has had some ups and downs, and the picture regarding price pressures is not completely clear. Investors will want to see more clarity on inflation and the Fed’s plans before making any big bets. This could happen quickly but will more than likely take some significant time. The gold market could be likely to remain range bound until more clarity is seen. This could leave the metal vulnerable to a sizable sell-off as frustrated bulls leave the party. Any significant sell-offs are likely to be met with aggressive buyers, however, as long-term players look to get their gold on sale.

 

For the time being, the $1800 level and the $1900 level are key. If the bears can take out the $1800 level on a closing basis, more downside could be in the cards. If the bulls can retake the $1900 level on a closing basis, more upside may follow.