Gold Prices Caught In The Middle Of A Trading Channel - Analysts
(Kitco News)- Don't expect uncertainty in the gold market to go away anytime soon as analysts see potential for upswings and downswings while prices continue to hover in the middle of a short-term trading channel.
In a note to clients, Ole Hansen, head of commodity strategy at Saxo Bank, said that risks are growing in the gold market and prices could see a prolonged correction, falling to key support around $1,300 an ounce in the near term.
Hansen added that the yellow metal's recent price decline is the fifth time since 2014 that the market was unable to push through to new highs. To the frustration of many investors, prices were unable to move above January's highs despite renewed momentum last week. Hansen said that renewed strength in the U.S. dollar and rising 10-year bond yields are weighing on the yellow metal.
April gold futures settled Thursday at $1,332.70, relatively unchanged from the previous session.
While there is still strong long-term bullish momentum in the marketplace, James Stanley, currency strategist at DailyFX.com, said that the door is open to more weakness in the short term.
"The primary complication with a short-side stance in Gold at the moment is that the U.S. Dollar is bucking up against resistance, and there are more resistance levels on the horizon. While this doesn't preclude a continuation of the bullish advance in the Greenback, it would still be very early to prognosticate that as anything more than a retracement in the year-long bearish trend; so this bearish stance in Gold would be short-term in nature, at least for now," he said in a note to clients.
The U.S. dollar index, while bouncing off a three-year low, has been unable to hold gains above critical resistance at 90 points, last trading at 89.75, down 0.41% on the day.
In the near-term, Stanley said that he is watching initial support at $1,324.75 an ounce, with further downside targets at $1,317 an ounce and then $1,307 an ounce. On the upside, he said that he sees strong resistance at between the 2017 high of $1,357.50 and the recent January high of $1,366 an ounce.
Bill Baruch, president of Blue Line Futures said in a note Thursday that while he is bullish on gold in the long-term, he sees the potential growing for a period of "wide-range consolidation." He is looking for gold to hold initial support around $1,325 an ounce. But if that breaks, Baruch said that a drop to $1,309 would attract a lot of buying interest.
By Neils ChristensenFor Kitco News
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