The Bulls Are In Charge Of The Gold Market: Key Levels To Watch
(Kitco News)- Renewed safe-haven demand on theback of a weaker U.S. dollar has helped boost gold’s technical momentum andsome analysts see the potential for higher prices in the near-term.
According to some analysts,gold's newfound momentum has helped the gold market break bearish technicalas the price action was forming a short-term head and shoulders pattern.Officially the pattern isn’t broken until prices push above the “neckline” whichcomes around $1,354 an ounce.
Aprilgold futures last tradedat $1,350 an ounce, up almost 1.5% on the day.
“With gold’s momentum, I would expect thepattern will be broken shortly,” said Darin Newsom, senior technical analyst atDTN.
Newsom said that if that near-termresistance level is taken out then the next price target is the January high at$1,365.
“Long-term gold’s technicalhaven’t changed. The market continues to make higher highs and higher lows andis very clearly in an uptrend,” he said. “We take out $1,365 then this marketultimately wants to go higher.”
Fawad Razaqzada, technicalanalyst at City Index, said that he wasn’t paying much attention to theshort-term head and shoulders pattern and was looking for at recent retracementlevels.
He explained that despite itsrecent pullback, gold prices have managed to hold on to crucial retracementlevels.
“That tells me that the buyersare in control of this market and prices are going higher,” he said.
Looking at the long-termpicture, Razaqzada notes that gold has risen higher for three consecutive yearswith prices last month hitting a 1.5-year high. He added that it if prices pushabove the January high his next target is the 2016 at $1,377.
“Not only do we see higher highsbut all the trend lines are pointing higher,” he said. “But I’m going to takethis market one level at a time.”
As to whether gold has room tomove higher, Bill Baruch, president of Blue Line Futures, said that investorsshould watch the U.S. dollar index. Wednesday, the index was unable to hold itsground around the critical level of 90, which has helped boost gold prices.
“I think we could seesignificant U.S. dollar weakness through the first half of the year,” he said.“The real move in gold is yet to come. I think we could see prices above $1,400an ounce later this year.”
However, Baruch added thatinvestors should be patient and not try to chase the market. If investors arefrustrated that they missed the last push in the yellow metal, Baruch said thatthere is still value in other precious metals.
“I don’t think anyone is as longas they would like to be in gold after a move like this but this is whypatience is key,” he said. “If you have no exposure in gold right now then youmight want to look at silver as that has a lot of potential and is undervalued.”
March silver futureslast tradedat $16.685 an ounce, up more than 1% on the day. Traditionally, silver, becauseof its volatility, outperforms gold on the upside and the downside.
Baruch added that he sees strongresistance in gold between $1,360 and $1,390. But he said that he would be agold buyer again if prices broke convincingly above $1,390.
The gold market has beenresilient Wednesday as prices remain near session highs, recovering from a $14drop following stronger than expected inflation data and disappointing retailsales numbers.
By Neils ChristensenFor Kitco News
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