Gold Falls after Hedgers Lift Protection

April Comex Gold futures finished lower on Monday. The market rallied initially as investors awaited the results of the Crimean referendum. Citizens approved Crimea’s secession from Ukraine to Russia. Investors didn’t seem to be too worried about the news. The lifting of the uncertainty over the vote is what underpinned the market last week. Once the uncertainty vanished the need for hedge protection also vanished, leading investors to pare their long hedge positions.

Technically, the market is set up for a potentially bearish closing price reversal top, but not necessarily a change in trend. The next downside target is $1355.95 to $1347.30. Buyers could return to the long side if the stock market begins another sell-off.

May Crude Oil tried to rally early, but the volume wasn’t there to drive it higher. Even the weaker U.S. Dollar couldn’t drive up interest in the long side. Oversupply and worries about the strength of the U.S. economy are two reasons for the weakness. In addition, the market may still be feeling the effects of the sale of oil from the U.S. strategic supply.

The way the market reacted last week to the threat of Russian military action in Ukraine, indicated that additional sanctions by the West against Russia or even some military moves will be bearish for crude oil

The GBP/USD posted a small gain on Monday after confirming last week’s technical closing price reversal bottom. The move suggests that the market is forming a support base. The Sterling posted a gain even after U.S. Industrial Output rose in February by 0.8 percent. This was better than the 0.1 percent rise estimated by economists.

EUR/USD also reacted positively to the news out of Crimea. The European Union and the U.S. may not have liked the outcome of the vote, but the market seems to like the non-violent result. EUR/USD traders also shrugged off the better-than-expected March Empire State Factory Index report. The catalyst behind the surge in the market was the lower than expected NAHB Housing Market Index. This measure of home builder confidence rose 1 point from 46 to 47. Traders were looking for 50.

If the Ukraine situation remains calm this week, then the focus will shift to the Fed’s two day meeting on Tuesday and Wednesday.