Gold prices were pressured by strength in the U.S. dollar

The gold price turned sharply lower on Monday as the recent weakness in precious metals carried into this week.  The spot price of gold fell as much as $20.77, or 1.2%, to $1,734.14 per ounce, its lowest level since September 13th.  Gold prices were pressured by strength in the U.S. dollar – which coincided with a better than expected report on U.S. retail sales and further sovereign debt concerns in Europe.

Looking ahead, Hansen contended that the gold price needs to “Hold on to the $1,737 low in order to avoid a deeper correction at this time.  Either OMT in Europe or a weaker dollar seem to be what we are lacking at the moment, so we could see investors… take some chips off the table while they wait for a better level to re-enter.”

The OMT, Outright Monetary Transactions, refers to the European Central Bank’s (ECB) bond buying program that President Mario Draghi announced last month.  While the ECB has yet to implement the program, it stands ready to do in the event that bond yields in nations such as Spain and Italy return to the alarmingly high levels they were at earlier this year.
Over the weekend, euro zone officials who spoke on conditions of anonymity speculated that Spain could request a bailout as soon as next month.  The need for financial assistance could be coupled with a revised loan program for Greece, whose economy has continued to deteriorate despite multiple rounds of aid in recent years.

Back in the U.S., this week’s economic calendar is particularly heavy and contains several reports that are likely to influence gold prices and the broader financial markets.  The Consumer Price Index (CPI), one of the most closely-watched measures of inflation, will be announced on Tuesday, followed by Housing Starts on Wednesday.  Thursday’s schedule includes Weekly Jobless Claims, as well as the Philadelphia Fed Index and the Leading Indicators report for September.  The week then concludes with Existing Home Sales on Friday.

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