Spot gold prices are having one volatile day today. The precious metals markets gapped down overnight and were trading solidly lower with gold prices trading below the $1340 level and silver hitting the lowest level since 2010. There did not seem to be any news piece or specific headlines that were responsible for the overnight losses.

In fact, the market just appeared to be picking up where it left off on Friday-with sellers firmly in control and looking for a re-test of the April lows. It was not meant to be for gold this time around however, as prices filled the gap throughout the morning and are currently trading sharply higher on the day. This swing in price action does not appear to have a single catalyst either.

It would be logical to assume that when gold failed to work lower after the overnight weakness the shorts in the market got nervous and we could be seeing a very large and powerful short covering rally. Rallies of this nature-when everyone is on one side of the boat, can drive prices dramatically higher in very short order. It would not be at all surprising to see such price action in gold prices. In fact, we are seeing a key reversal day on the daily charts which could indicate higher prices in the near future.

As we have discussed, the fundamental landscape really hasn’t changed much at all in recent months. With global central banks continuing to print money and with debt piling up, it would seem that there are just as many reasons to be buying gold now as there were in the past several years. Physical demand has remained strong throughout all of this, and perhaps the precious metals are currently just lacking that single catalyst that will send all shorts scrambling for cover as new buyers come into the market. We shall see.

The outside markets are working in gold’s favor today as crude oil prices are trading higher while the U.S. dollar index is working lower. Stocks however, are continuing their winning ways and there does not appear to be an end in sight for the rally. Should the rally stall however, or begin a sizable correction, many are of the opinion that could benefit bullion as investors look to again diversify some assets and seek some perceived safe-havens.

This week is pretty light on data, but the gold market will be carefully watching the FOMC minutes on Wednesday. These minutes will be closely scrutinized for clues as to the timing and extent of fed stimulus removal. This report will likely be the biggest driver of gold prices for the week.