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Gold Analysis: Don't Expect A Break Through $1,300 Just Yet - Commerzbank

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(Kitco News) - A growing divergence within the Federal Reserve on inflation pressures is helping to push gold to a key resistance point; however one bank doesn’t think the metal has enough technical momentum to push through just yet.

In its weekly technical outlook, Commerzbank analyst Karen Jones said that she is slightly bearish on the yellow metal within a one-week horizon. Looking at the technical picture, she said in her report that gold prices face significant resistance at $1,309 an ounce.

“While capped here it will continue to weigh on the downside and imply a test of the 200 day ma at 1254.41, where we should see the market attempt to stabilize,” she said the report.

While Jones sees lower prices in the near-term, she still remains bullish longer-term. She said that a push above initial resistance will trigger the market to retest a four-year downtrend at $1,357.57 an ounce.

Jones is also bullish on silver prices as she notes the grey metal has held support at a key retracement level.

“Silver has sold off to the 61.8% retracement at 16.37, the spike down here plus the recovery leads us to suspect the end of the correction lower. We regard 16.31 as an interim low and look for recovery to initially the 200 week ma at 17.34 and then the 17.89 [200-month moving average],” she said.

Jones’s comments come as gold has managed to push to a two-week high overnight following, what the market deemed as, dovish minutes from the September Federal Reserve Monetary policy meeting. The minutes showed that some committee members were growing concerned about weak inflation pressures.

The minutes said that “many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent.”

The weak inflation pressures are also causing some members of the Federal Reserve to question further interest rate hikes.

“A few of these participants thought that no further increases in the federal funds rate were called for in the near term or that the upward trajectory of the federal funds rate might appropriately be quite shallow,” the minutes said.

However, despite renewed dovish comments, the committee continues to see a gradual pace of interest rate hikes for the rest of the year.

December gold futures last traded at $1.295.70 an ounce, up 0.52% on the day.

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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