Gold Traders Digesting Draghi Comments

December Comex Gold futures are trading slightly lower, but inside the trading ranges of the last two days. This chart pattern tends to indicate impending volatility. Technically, the market may be oversold after last week’s sharp sell-off.

The chart pattern also indicates trader indecision. Confusion over the fundamentals may be triggering this. On one hand the strong U.S. Dollar should be putting pressure on gold, however, the gap lower in the Euro and the uncertainty over the Euro Zone economy may encourage some aggressive investors to take long positions in gold. The fear of deflation in the Euro Zone is one concern that could drive investors into gold.

October Crude Oil is trading a little better. Technically oversold conditions are encouraging some light profit-taking and short-covering which is helping to underpin the market. The fundamentals are still bearish because of the size of the supply, but the market appears to have run out of aggressive sellers at current price levels. This may lead to a short-term rally into Wednesday’s supply and demand report.

The EUR/USD gapped lower on Monday. The catalyst behind the move was a comment from ECB President Mario Draghi saying that he is considering unconventional ways to help stimulate the economy. This includes quantitative easing. The implementation of QE is bearish for a currency because it tends to flood the market with cash.

Technically, the gap between 1.3220 and 1.3211 is new resistance. The market also gapped a long-term Fibonacci level on the weekly chart at 1.3221, forming a key resistance cluster.

Carryover selling from last Friday’s speech by Fed Chair Janet Yellen helped drive the GBP/USD lower on the opening today, but because of the thin trading conditions caused by today’s U.K. bank holiday, traders decided to make a market and reverse back up.

The focus this week for U.S. Dollar investors will be New Home Sales and Durable Goods. Both reports are expected to show fresh gains. New Home Sales are expected to show a rise of 5.7 percent in July after posting an 8.1 percent break in June. Durable goods in July are expected to rise at its fastest pace since March 2011.

Draghi’s comments about the possible need for additional stimulus should keep the pressure on the Euro, but it may also help boost gold prices because of speculative buying. His comments definitely raised some concerns about the Euro Zone economy, but may have also added a little more fear.