Potential for a third round of quantitative easing (QE3) will continue to be a critical factor for the gold price heading into 2012

Looking ahead to the first trading week of the new year, a slew of U.S. economic reports are likely to serve as catalysts for the gold price. Later this morning, the ISM Index – a key manufacturing gauge – and a report on Construction Spending will be released. The latest Fed minutes – from last month’s Federal Open Market Committee (FOMC) meeting – are due out this afternoon. The remainder of the week includes several data points on the labor market – with ADP employment and weekly jobless claims scheduled for Thursday, followed by the monthly non-farm payrolls data on Friday.

The Federal Reserve will undoubtedly be keeping a close eye on the economic data as it prepares for its next FOMC meeting on January 25-26. The potential for a third round of quantitative easing (QE3) will continue to be a critical factor for the gold price heading into 2012. Thus far, the Ben Bernanke-led Fed has stressed the importance of maintaining accommodative monetary policies for the foreseeable future, but has yet to launch a new money printing campaign.

While the calendar is considerably quieter in Europe this week, German Chancellor Angela Merkel and French President Nicolas Sarkozy announced yesterday that they will meet in Berlin on January 9 to discuss next steps in combating the sovereign debt crisis. Euro zone officials are then scheduled to meet on January 30 at the next European Summit to draft a stricter set of measures for reigning in government spending.

Commenting on the outlook for the gold price, VTB Capital analyst Andrey Kryuchenkov wrote in a recent note to clients that “Longer-term players and physical buyers are likely to return to the market in the first half (of 2012), while the latest price retreat could serve as a good encouragement for hesitant market participants…There is little alternative to gold in times of economic uncertainty, despite the recent rush for the dollar. Gold stands on its own in terms of safe haven buying and bullion allocations are only likely to gain with currency protectionism still at large.”