Precious Metals Markets Look for Direction this AM

Despite the stronger USD and hawkish comments from FOMC members on Friday, gold led the way higher, recording a fourth straight weekly gain. Unfortunately, it was not a very convincing gain as volume remained light and the rally appeared to be driven by short covering. This morning finds our market looking for direction as technical levels continue to keep us in a tight trading range. On the positive side, we have crude oil holding $50.00 and moving higher today, but with the record inventory hanging over that market it is difficult to see crude rallying enough to take gold significantly higher.

The big weight on our market continues to be the USD. The breakout I expected when the Euro broke 1.10 did not happen and for the moment it capped gold at $1,225.00. If the USD continues to strengthen and it takes a run at parity against the Euro, the likelihood is gold will move back towards and perhaps lower than $1,150.00. Interest rates and FOMC policy at this point are neutral in my opinion as economic data will dictate when the rate hike comes. I continue to think it will be a single hike this year in September, but more importantly it is likely already built into the market and when it does come it will not be a shock and will have a minimal impact on all markets. In the short term with gold in the driver’s seat we can expect support from the low $1,200.00s through the mid $1,190.00s with resistance from $1,210.00 through $1,212.00.