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Fed Speakers, USD Strength To Push Gold Around Next Week - Analysts

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(Kitco News) - As expected, gold has seen a nice bounce following what analysts described as a dovish hike from the Federal Reserve and now the question that needs to be answered is if gold has enough momentum to push higher.

gold will take its lead from the U.S. dollar next weekAlthough the U.S. Central bank hiked interest rates 25 basis-points earlier in the week, it maintained its outlook for the U.S. economy and interest rate projections. According to some analysts, gold investors were relieved that the Fed was not more aggressive in their outlook.

April gold futures, ending a two-week losing streak, settled Friday at $1,230.20 an ounce, up more than 2% from the previous week. March silver futures also saw its first positive weekly gains in two weeks as prices pushed above $17 an ounce. Silver futures settled the week at $17.413 an ounce, up almost 3% from the previous Friday’s close.

Phillip Streible, senior market strategist at RJO Futures said that he expects gold will be sensitive to U.S. dollar moves. He added that if the U.S. Dollar Index pushes back below 100 then April gold futures have a chance to push to the firm’s near-term target of $1,250 an ounce. However, if the index pushes back to 102 then gold could give back most of its recent gains.

“I think right now you stay long gold as long as prices are above the 50-day moving average, which comes in at $1,218,” he said. “If prices drop below that level then there is a chance this whole bounce is reversed.”

What Will Move The U.S. Dollar?

Colin Cieszynski, senior market analyst at CMC Markets Canada, said that he is also expecting the U.S. dollar to weaken as U.S. dollar bulls have been forced to adjust their interest rate expectations. He added that ahead of the Fed the market is pricing in four to five rate hikes this year.

Although the U.S. dollar is down, it is not out and renewed momentum could be fanned by potentially hawkish comments from Federal Reserve members could fan those flame again, Cieszynski.

While U.S. data is light next week, it will be full of Fed speakers, including  Chicago Fed President Charles Evans, New York Fed President William Dudley, Dallas Fed President Robert Kaplan, Minneapolis Fed President Neel Kashkari and the Fed Chair herself Janet Yellen. Cieszynski said that he will be listening for any comments regarding the central bank’s balance sheet.

“I think there is a chance that the Fed speakers could dial back some of the recent dovish sentiment,” he said. “That would be positive for the U.S. dollar.”

Cieszynski, said that he is neutral on gold in the near-term and also sees $1,218 an ounce as the key level to watch in the near-term.

Momentum Favors Higher Gold Prices?

Greg Harmon, founder of Dragonfly Capital, said that he sees the potential for gold prices to move higher in the near-term.

He explained that gold’s momentum has created a Positive RSI Reversal, as the metal’s Relative Strength Index makes a new low and the price doesn’t.

“This is a major reset in gold’s momentum that could give it the potential to push to $1,280 an ounce,” he said.

However, he added that in the near-term, the market could find some resistance between $1,250 and $1,260.

“I think as long as gold stays above $1,200 an ounce it is a buy,” he said.

While sentiment in the gold market has improved since the Federal Reserve monetary policy meeting, some analysts are warning investors and traders to be more strategic and look for the right opportunities. Commodity analysts at iiTrader said in a note to clients Friday that at its current price around $1.230, gold looks a little over extended.

“We remain long term bulls but do not want to chase a move,” they said.

Levels to Watch

A lot of eyes are looking to see if gold can hold support at $1,218 an ounce and according to some analysts, a break below this level makes $1,200 an ounce the next major downside target. Some support might be found at $1,210 an ounce, which is the market’s 100-day moving average.

On the upside, analysts are also watching $1,250 level as this represents a retracement area from the July highs to the December lows. Some analysts are targeting gold’s 200-day moving average, which comes in at $1,262.60 an ounce.

The Final Say…

Fed speakers will be the biggest risks to the marketplace; however Cieszynski said that gold could benefit from continued geopolitical risks, especially if there are any major headlines from the Group of 20 meeting in Germany this weekend.

The docket of U.S. economic data is fairly light with some U.S. home sale data to be released as well a preliminary manufacturing data. The biggest highlight of the week will be February’s durable goods numbers, which will be released Friday.

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 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.

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