Gold Prices Need To Hold $1,280 As U.S. Dollar Moves Higher - Saxo Bank
(Kitco News)- The gold market, which istrading at a four-month low is entirely at the mercy of the U.S. dollar, whichis seeing a surge in momentum, pushing to a four-month high, according to onecommodity analyst.
Ole Hansen, head ofcommodity strategy at Saxo bank said in a report Monday that the two supportlevels he is watching very closely are $1,300 an ounce and then $1,280 anounce.
“Multiple failures since2016 in breaking above an area between $1,365 and $1,375/oz has left the [gold]market nervous with the focus once again on finding support.” He said. “Thepotential success of these two levels in capping the downside at this stage ismostly in the hands of the dollar and its short-.term trajectory.”
Hansen’s comments come asthe gold prices have fallen to within a hair’s breadth of his first initialsupport target. June gold futures last traded at $1,307.10 an ounce, down 0.92% on the day and its lowestlevel since late December. The selling pressure in gold was exacerbated afterprices fell below the 200-day moving, which came in at $1,313.50 an ounce.Meanwhile, the U.S. Dollar Index is currently trading at 92.37 points, thehighest level since early January. Momentum picked up as the index broke aboveits 200-day moving average, which comes in at 92.01 points.
Unfortunately for the goldmarket, Hansen said that the U.S. dollar could continue to push higher asinvestors cover their massive short position. Trade data, he explained showsspeculative bearish positions against the U.S. dollar are starting to shiftafter hitting a seven-year high.
“The current strength of thedollar, driven by short-covering, rising bond yields and a slowdown in Europe,has rattled a market which previously held a general belief that the greenbackwould continue to weaken,” he said.
Although gold appearsdirectionless, the near term Hansen said that there are positive long-termtrends for the precious metal, including an overall uptrend within thecommodity sector, higher inflation pressures and ongoing geopoliticaluncertainty, even if tensions have eased recently.
“The threat of trade warbetween the US and China and more importantly the US and Iran remains in placeand both could quickly reverse the current lack of focus,” he said.
Hansen added that while thefutures market has suffered, there is still healthy demand from retailinvestors as physical holdings of gold-backed exchange traded products hasrisen to their highest level since 2013, totaling 2,341 tonnes.
By Neils ChristensenFor Kitco News
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