Who Wins The Tug Of War In Gold? Geopolitics Versus Better Growth Outlook

The gold market is caught in a tug of war right now, supported on the downside by concerns about geopolitical uncertainty, but beaten down by concerns that stronger economic growth will lead to Fed rate hikes sooner rather than later.

The Bulls: Could Russia adopt an energy embargo on its oil exports? What impact could that have on the European Union and even the global economy? These and other multitude of global hot spots, instability and political, military and economic concerns has put a bid into the gold market in recent days and weeks. Dips in gold have been used as buying opportunities.

The Bears: On the other hand, this week will usher in an economic heavy data week in the U.S. — with forecasts showing expectations of generally improving economic conditions. That in turn pushes the U.S. Federal Reserve closer and closer to the timing of its first monetary policy rate hike.

With these two underlying bullish (geopolitical uncertainty) and bearish factors (concerns over economic improvement and rate hikes) buffeting gold back and forth, near term trade could be choppy, volatile and see whipsaw type of trade amid illiquid late summer trading conditions.