Gold Unable To Hold CPI Gains As Traders Take Profits
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(Kitco News) - A sharp rally in gold following another disappointing inflation report has prompted some profit taking ahead of the key psychological support at $1,300 an ounce.
For the third time since April, gold has been within striking distance of $1,300 an ounce only to lose momentum at the finish line. Following a weaker-than-expected Consumer Price Index, December gold futures rallied to a high of $1,298.10 an ounce; however, since then gold has fallen back to unchanged level, last trading at $1,293.30 an ounce up 0.25%.
Ole Hansen, head of commodity strategy at Saxo Bank, said that the strong rally could have prompted some profit taking from traders ahead of the weekend. He added that with so much uncertainty in the marketplace, it is not surprising that traders are quick to lighten their positions.
“Think of it as pulling the string on a bow, if you pull too hard and too fast, you can stretch the string and lose all the tension. I think that is what happened. We have now run up to this area three times so it seems like a logical place to take profits.”
While rising geopolitical tensions between the U.S. and North Korea have helped to push gold to its highest level in more than two months, Hansen said that the market needs another driver.
“I think that has to come from a selloff in the stock market,” he said.
While gold has given up its CPI gains, the market is still in strong bullish territory, according to analysts at iiTrader.com. They said that the first support level to watch in the near-term comes in at $1,288 an ounce, with stronger support at $1,280 an ounce.
For this market to really pick up momentum, they said that prices have to break above $1,309 an ounce.
Sean Mahoney, market analyst at IG, said that he is watching support at $1,284 an ounce.