Gold futures prices are moderately higher in early trading Tuesday and briefly pushed above $1,600.00 as fresh safe-haven demand has surfaced amid a flare-up in the European Union sovereign debt crisis. Short covering and bargain hunting are also featured in gold, following last week's strong selling pressure.
The European Union and its sovereign debt problems are back on the front-burner of the market place after a few months' hiatus. Italian elections that just concluded and failed to show a clear winner indicated voters ostensibly rebuked present government austerity measures meant to repair Italy's damaged economic and financial structure. It also suggests political instability in Italy in the coming months. The Italian vote left the market place wondering when the next shoe will fall in the EU debt crisis that remains a serious matter in the world market place. Flight-to-safety buying of U.S. Treasuries, German bunds, gold and the U.S. dollar all quickly came back into vogue late Monday. Meantime, risk assets such as world stock markets and many commodity markets, and the Euro currency, were pressured on the Italian vote news. Other than the safe-haven German bunds, European bond yields were on the rise as fears of an EU debt contagion are again surfacing. There are Italian government debt auctions Tuesday and Wednesday that will be very closely scrutinized by the market place.
The U.S. government's likely inability to agree on a taxing and spending plan by the March 1 sequestration deadline is added to a nervous and uncertain atmosphere in the world market place this week.
Traders and investors are awaiting the Tuesday and Wednesday testimony on the U.S. economy to Congress from Federal Reserve Chairman Ben Bernanke.
Traders and investors will be looking for fresh clues on the direction of U.S. monetary policy in the coming weeks and months. Many market watchers this Bernanke will make remarks meant to reassure the monetary policy doves that the U.S. central bank will maintain its easy money policy for the foreseeable future.
Technically, April gold futures are seeing a corrective bounce after last week's strong downside price pressure. Gold are still in a six-week-old downtrend on the daily bar chart. The gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at last week's high of $1,618.80. Bears' next near-term downside breakout price objective is closing prices below solid technical support at last week's lower of $1,554.30. First resistance is seen at the overnight high of $1,602.30 and then at $1,609.20. First support is seen at the overnight low of $1,587.30 and then at this week's low of $1,574.70.