Gold Price Continues To Search For Direction

New York (May 29)  Gold continues to be caught in a series of crosswinds. Financial risks in Europe continue to grow as political uncertainties in Italy and Spain dominate the headlines. The euro remains under heavy selling pressure, as traders perceive the ECB may delay plans to unwind their quantitative easing policy, as the Fed continues to tighten. Elections in Italy are likely to be called for late summer or early fall and in Spain a non-confidence vote may happen as early as Friday. The growing populist movements in Europe may once again bring into focus the viability of an EU membership with younger voters. Gold buying has picked up in Europe over the past few weeks, as the metal has appreciated in euro terms but the trend remains conflicted in North America. The on-again North Korean summit, the strengthening dollar and yield differentials continue to be headwinds for gold prices in U.S. dollars. The contagion risk to the U.S. financial system from current events in Europe remains slight in the short term but has the potential of being disruptive of the Italian and Spanish votes become a referendum on the EU. We continue to advise holding a percentage of the portfolio in gold. For traders, the whip-saw action remains challenging. The momentum indicators are neutral. Technically, we need a break above the $1,307 level and support sets up initially at $1,292 and then again at $1,287.

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