Gold prices are moving moderately higher to begin the new trading week. In fact, gold prices overnight saw their highest levels since the end of October. Continuing risk aversion and geopolitical worries are helping to drive gold higher.
The situation in Ukraine continues to be a large cause for concern. Over the weekend, the Ukrainian president went into hiding, and a warrant has since been issued by the acting government for his arrest. The situation remains very fragile, with the European Union and Russia appearing to be on opposite sides of the fence regarding the issue. In addition, the finances of this country remain in peril, and potential defaults are looming. This situation needs to have some clarity brought to the table in short order, otherwise it could potentially escalate.
In other news, more signs of deflation in the Euro zone have increased speculation about the need for additional monetary stimulus from the ECB. The EU saw its month over month inflation gauge fall 1.1% in January which is the steepest fall since the EU began keeping records. The Euro is slightly lower today as of this post, but this could potentially strengthen the U.S. Dollar and thus pressure precious metals prices.
It will be a fairly busy week data-wise in U.S. markets. Today investors will get the latest readings on PMI Services as well as Dallas Manufacturing survey data. Tomorrow will be the Case Schiller housing index along with consumer confidence and the Richmond Fed Manufacturing Index. Wednesday investors will get the latest data on new home sales. Thursday will bring the latest numbers on durable goods orders and weekly jobless claims. Friday is the biggest day of the week data-wise and investors will get the latest readings on Q4 GDP, Chicago PMI, consumer sentiment and pending home sales.
Gold investors will continue to watch the data stream closely. In addition, investors will also be watching for any further developments out of Ukraine. Any signs of economic weakness or further unrest in Ukraine could potentially add to the flight to safety bid in gold and precious metals. In addition, stocks are re-testing prior highs and may be poised for another leg higher. Conversely, should stocks begin to falter again at current levels, the possibility of a larger correction in equities may increase. This could potentially further boost gold’s appeal as investors reallocate funds.
Improving chart structure in gold is also likely playing a factor in the metal’s recent upswing. The metal has been in a strong uptrend on the daily chart since the beginning of the year, and thus far is not showing any signs of slowing.