Gold Prices Have Room To Move Lower; Technicals Remain Bullish - Analysts
(Kitco News)- Thegold market is being weighed down by a stronger U.S. dollar, but some analystsremain bullish on the yellow metal as the market continues to hold criticalsupport levels.
Afterstarting the year near a four-month low, the U.S. dollar is beginning to catcha bid, rallying through near-term resistance levels. The renewed momentum haspushed gold prices well off their recent four-month highs. However, after a strongrun, some analysts were expecting to see some consolidation in the yellowmetal.
Analystshave described the recent price action in gold as normal technical sellingpressure. The profit-taking comes after an unprecedented 12-day run, which sawgold prices rally more than 7%. Looking ahead, analysts remain bullish on goldas it holds key support levels.
“Amove back below $1,295 is needed to put a bearish spin on things,” said ChrisBeauchamp, market analyst at IG, said in a research note Tuesday.
ComexFebruary gold futureslast traded at $1,311.40 an ounce, down 0.68% on the day.
IlyaSpivak, senior currency strategist at DailyFX, is also watching $1,295 ascrucial initial support for the yellow metal in the near term. He added that heis not expecting to see much volatility in the gold market until the end of theweek, when the U.S. Consumer Price Index report is released.
Analystshave noted that gold has been sensitive to inflation data recently as theFederal Reserve remains concerned about the economic impact of weak pricepressures. Analysts have said that subdued inflation could keep the U.S.central bank from aggressively hiking rates in 2018, which would keep realrates low, which is favorable for gold.
Spivakadded that he would need to see gold prices push above $1,330 to attract morebuying interest.
BillBaruch, president of Blue Line Futures, said in a research note that he seesstrong support between $1,303 and $1,302. He added that he is shrugging offrecent U.S. dollar strength. “The metal has remained very constructive and it’sOK to go through a healthy consolidation phase,” he said.
Ina recent interview with Kitco News, Darin Newsom said that if the gold marketcan break resistance at $1,333 an ounce, it would have the technical potentialto rally all the way to $1,381 within the first quarter. He added that hewouldn’t turn bearish on gold until prices fell to a new four-week low, whichcomes in around $1,240 an ounce.
Looking at the U.S. dollarindex, currency analyst at Brown Brothers Harriman said that it has room to the92.85 area as the market was “sold hard” in the final weeks of 2017.
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