Gold prices gained last week, rising volatility in markets over the past period pushed investors away from higher yielding and risky assets amid rising concerns over the outlook for global growth on signs of slowing economic activities in major economies around the world.
Nevertheless, all the hopes came to halt with the end of the week with rating agencies again raising the heat. Already throughout the week comments from Fitch were generally targeting the risk that Italy faces and the likely rating cut and that was reiterated by S&P on Friday that sent markets frantically lower.
This week the weak data flow from the euro area will leave the focus on the debt crisis with more auctions and eyes on rating agencies, especially after Fitch earlier said that the review might be concluded around January 15 and with S&P’s warning investors will remain sensitive to any comments and eyes the auctions closely with Spain, France, Portugal and Greece heading to the market.
From the U.S. front heavy data is awaited yet generally we expect good industrial and housing data and if the sentiment remains fragile and good figures are provided from the U.S. the attempts for the euro to stabilize last week will be dethroned and the bearishness will take hold once again assuring that it was only false attempts as unless the euro stabilizes this week higher then we can surely say the bearishness is back.
We need to track the debt sales this week as well with eyes on Italy, France, Greece and Portugal as the yields and demand will be closely observed. The euro area lacks major fundamentals yet the debt crisis developments and any comments from leaders will be watched.
We continue to expect that gold prices will rise over the coming period, however, we also expect volatility to continue to dominate gold prices over the short term, as despite the recent improvement in overall conditions, yet risks are still threatening the progress of improvement, especially as the outlook for global economies remains full of uncertainty. We also expect Europe to continue to dominate the headlines next week.