IGI Securities Limited – Commodity News

Karachi, December 20, 2017 (PPI-OT): Gold

Technical

Gold markets look likely to be very noisy over the next several sessions, but I think that the $1250 level on the short-term charts should continue to offer support, and I think if the US dollar continues to fall, it’s likely that you will continue to go upside in the gold market. However, there are a lot of noisy areas above, and I think that the initial target will probably be the $1275 level above. If we can break above there, then the market should go much higher, perhaps reaching towards the $1300 level above, which is a longer-term target of mine going into 2018. If we can break above the $1300 level, the market should go much higher, perhaps reaching towards the $1500 level after that. That is a longer-term goal for gold traders from what I can see, and that could take quite a while to get there. I think that holding onto physical gold is probably the best way to play this market.

Highlights

Gold dipped yesterday as U.S. Treasury yields rose on an uptick in housing starts

Market players were wary of taking new positions before the holiday season

Gold is on track to post its narrowest trading range of any quarter in a decade in the last three months of the year

U.S Treasury yields hit session highs and the yield curve steepened

Holdings of the world’s largest gold-backed exchange-traded fund, New York-based SPDR fell 7.1 tonnes

Fundamentals

Gold prices rose for a fourth day in today’s session as expectations that the U.S. government will enact the country’s biggest tax reforms in 30 years held the dollar steady.

Gold has risen more than 2 percent from a five-month low of $1,235.92 on Dec. 12, helped by a weakening dollar that makes gold cheaper for holders of other currencies.

However, market players are expected to be wary of taking new positions before the holiday season and prices are on track to register their narrowest trading range of any quarter in a decade in the last three months of 2017.

Gold is coming up from a cyclical bottom. It’s going to get quieter due to the upcoming holiday long-weekends. Spot gold was up 0.2 percent at $1,264.52 an ounce while U.S. gold futures were 0.3 percent higher at $1,267.70 an ounce.

The dollar has slipped from a one-month high earlier this month but was steady on Wednesday after the Republican-led U.S. Senate approved a sweeping $1.5-trillion tax bill that could boost U.S. economic growth.

Markets were however looking ahead to Friday by which time Congress must pass a temporary spending bill to avoid a government shutdown. Holdings of the world’s largest gold-backed exchange-traded fund, New York-based SPDR Gold Shares, fell 1 percent over Monday and Tuesday to the lowest level since early September. But low prices have spurred demand for physical gold.

Goldman Sachs said in a note it expected gold prices to fall further and reach $1,200 an ounce by mid-2018. We see the decline in gold as evidence that “fear” effects, which had been keeping gold supported, have at least partially moderated as U.S tax reform and the transition to a new Fed chair appear to be going smoothly.

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