After getting hammered late last week, the gold market is sharply lower again today to begin the new trading week. Spot gold prices are down significantly, declining by over $33 per ounce to $1957 and change. The metals are being sold off today as crude oil dipped below $100 per barrel and as risk appetite is seeing a slight improvement. Weaker crude oil is acting as a drag on all commodities, and if prices sustain a weaker tone it could be bearish for gold. The yellow metal is also weaker on renewed hopes for a de-escalation in the Russian/Ukraine war. The two nations continue to meet and hold talks, although nothing major has happened as of yet despite some notions of progress being made. In the meantime, the war moves on in Ukraine.
The most important data point of the week will be the FOMC meeting taking place Tuesday and concluding Wednesday. The Fed is widely expected to raise the Fed Funds rate by 25-basis points. While a rate hike may now be a foregone conclusion, the markets are likely far more interested in any commentary the Fed provides concerning its plans going forward. The Fed has already penciled in three rate hikes for this year. Many analysts now believe the central bank will need to raise rates four, five or even more times to have any effect on rampant inflation. Any clues provided by the Fed could move markets in the meantime, and if the Fed appears to be growing increasingly hawkish it could have a bearish effect for stocks and risk assets.
Stocks have already been under much more pressure in recent weeks. Equity markets have seemingly moved from a mentality of “buy the dips” to “sell the rallies.” This change may keep equity markets trending lower. Weaker stocks could have a bullish effect on gold, which could stand to benefit from increasing inflows. Stock market weakness could drive capital into the yellow metal and other metals markets, possibly driving prices higher in the process.
Key outside markets could be pointing to a top in market anxiety over the war. Crude oil is now sitting at around $102 per barrel after hitting 14-year highs over $130 just last week. Yields on treasuries have also been on the rise, with the benchmark 10-Year Note now fetching a yield of 2.115%.
The price of gold is in a six-week old uptrend on the daily chart. The bulls are still in control of the market despite the selling seen in recent days. The recent market weakness may be indicative of a top being in place, at least temporarily, and further weakness could validate that as being the case. The bulls upside target is to produce a close above recent all-time highs at $2078.80. A close above this level could set the stage for a sharp and rapid run higher with no upside chart resistance to stand in the way. The bears will look to target a decline below support at the $1900 level.