A Break Of $1,300 Could Push Gold To 2016 Highs
(Kitco News)- Renewedsafe-haven demand has helped generate strong momentum for gold as the markethas pushed through key levels, but more work needs to be done to confirm thelong-term uptrend, analysts say.
Thelatest move in gold, which has pushed prices within striking distance of $1,300an ounce, started Friday following weaker-than-expected U.S. employment data.The report caused investors to shift their expectations for Federal Reserveinterest-rate hikes later in the year. This created significant weakness in theU.S. dollar and pushed 10-year bond yields to their lowest levels so far thisyear.
Thequestion now on most traders' and investors' minds is what will be the nextlevels to watch after prices break the psychological barrier at $1,300 anounce. August gold futures last traded at $1,296.10 an ounce, up 1% on the day.
"Mygut is telling me that gold is entering a new long-term bull uptrend but weneed to see technical confirmation before we get too excited," said KarenJones, technical analyst at Commerzbank. "I have just been waiting for thisdowntrend to turn around."
Shenoted that gold, as it pushed above $1,285 an ounce, broke a six-yeardowntrend. She said the next important milestone is a weekly close above theApril high at $1,295 an ounce.
Sheadded that if gold breaks through $1,300, she could see the market testing lastyear's high by August.
"Ithink the range between $1,375 and $1,400 would be a strong magnet for themarket," she said.
Daren Newsom, senior analyst at Telvent DTN, is also watching fora weekly close above $1,295. He added that he could see gold pushing to$1,317.70 before the market looked overbought
"However, we appear to be in a fifth wave of a five-wave moveand momentum could propel gold through $1,317 to the 2016 highs at $1,377 anounce," he said.
While optimism is strong in the marketplace, Maxwell Gold,director of investment strategy at ETF Securities, warned that for these gainsto be sustainable, investors have to wait for next week's Federal Reservemonetary policy meeting.
Expectations are growing for a "dovish hike," in which theU.S. central bank raises interest rates by 25 basis points but signals acautious approach for further rate hikes.
"A slower pace of interest rate hikes and higher inflationcould push gold to last year's highs," he said.
While analysts at iiTrader are bullish on gold, they warn that investorsshouldn't chase the markets at these levels. They noted that renewed strengthin the U.S. dollar could create some profit taking among gold investors.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities,securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  |