IGI Securities Limited – Commodity News

Karachi, January 04, 2019 (PPI-OT): Gold

Technical

Gold markets have clearly broken out to the upside, slicing through the top of the up trending channel. That’s a very strong sign, but it appears that it is probably going to run into a bit of trouble at the $1300 level as it is psychologically important. The gold market goes higher but it would like to see a little bit of a pullback, perhaps down to the top of the previous channel, or even the 20 day EMA, pictured in green on the chart. Gold markets have been consolidating and longer-term trading between the $1200 level on the bottom and the $1400 level on the top. Because of this, it may eventually go looking towards the $1400 level, and that makes $1300 important because it is essentially “fair value. If it turn around and slice right through the $1300 level without pulling back, then it probably will see the $1400 level hit rather quickly.

Highlights

Recent market volatility has confirmed that gold remains a safe-haven asset

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding no yielding bullion

Volatile global markets always add to the charm of buying gold

A weaker dollar makes gold cheaper for holders of other currencies

Gold market in a longer-term recovery, driven by weakening U.S dollar and returning investment demand

Fundamentals

Gold prices scaled a more than six-month peak yesterday as fears of a global economic slowdown embellished safe-haven demand for bullion, with a weaker dollar adding further support.

Gold briefly pared some gains earlier in the session. Spot gold was up 0.3 percent at $1,288.49 an ounce, having touched its highest since June 15 at $1,292.32. U.S gold futures traded up 0.5 percent at $1,290.40.

Fears of an economic slowdown are one source of the equity market volatility, thus contributing to the covering of short positions in the futures market and investors’ renewed interest in gold.

The news from the technology giant also weighed on the dollar index, which slipped by about 0.2 percent. Weakness in the currency reflects concerns over the U.S economy and a drastic shift in investor expectations for interest rate rises, with many now expecting and end to the U.S Federal Reserve’s rate raising cycle.

Gold also hit multi-month highs in euro and sterling terms. Gold denominated in sterling peaked at 1,031.89 pounds during the day, its highest since Sept. 8, 2017, while it peaked at 1,137.47 euros, the highest since June 9, 2017.

If the fourth quarter theme of lower dollar, stocks and yields carries on, gold is likely to break higher and set its sight on the previous high around $1,380.

It gave stocks a small lift but not enough to trigger profit taking in gold. Gold is overbought on most measures and needs to consolidate but with the speculative long still building, the market will be looking for $1,300 sooner than expected.

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IGI Securities Limited – Commodity News

Karachi, January 04, 2019 (PPI-OT): Gold

Technical

Gold markets have clearly broken out to the upside, slicing through the top of the up trending channel. That’s a very strong sign, but it appears that it is probably going to run into a bit of trouble at the $1300 level as it is psychologically important. The gold market goes higher but it would like to see a little bit of a pullback, perhaps down to the top of the previous channel, or even the 20 day EMA, pictured in green on the chart. Gold markets have been consolidating and longer-term trading between the $1200 level on the bottom and the $1400 level on the top. Because of this, it may eventually go looking towards the $1400 level, and that makes $1300 important because it is essentially “fair value. If it turn around and slice right through the $1300 level without pulling back, then it probably will see the $1400 level hit rather quickly.

Highlights

Recent market volatility has confirmed that gold remains a safe-haven asset

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding no yielding bullion

Volatile global markets always add to the charm of buying gold

A weaker dollar makes gold cheaper for holders of other currencies

Gold market in a longer-term recovery, driven by weakening U.S dollar and returning investment demand

Fundamentals

Gold prices scaled a more than six-month peak yesterday as fears of a global economic slowdown embellished safe-haven demand for bullion, with a weaker dollar adding further support.

Gold briefly pared some gains earlier in the session. Spot gold was up 0.3 percent at $1,288.49 an ounce, having touched its highest since June 15 at $1,292.32. U.S gold futures traded up 0.5 percent at $1,290.40.

Fears of an economic slowdown are one source of the equity market volatility, thus contributing to the covering of short positions in the futures market and investors’ renewed interest in gold.

The news from the technology giant also weighed on the dollar index, which slipped by about 0.2 percent. Weakness in the currency reflects concerns over the U.S economy and a drastic shift in investor expectations for interest rate rises, with many now expecting and end to the U.S Federal Reserve’s rate raising cycle.

Gold also hit multi-month highs in euro and sterling terms. Gold denominated in sterling peaked at 1,031.89 pounds during the day, its highest since Sept. 8, 2017, while it peaked at 1,137.47 euros, the highest since June 9, 2017.

If the fourth quarter theme of lower dollar, stocks and yields carries on, gold is likely to break higher and set its sight on the previous high around $1,380.

It gave stocks a small lift but not enough to trigger profit taking in gold. Gold is overbought on most measures and needs to consolidate but with the speculative long still building, the market will be looking for $1,300 sooner than expected.

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