Gold Prices Have Room To Move Lower; Technicals Remain Bullish - Analysts
(Kitco News) - The gold market is being weighed down by a stronger U.S. dollar, but some analysts remain bullish on the yellow metal as the market continues to hold critical support levels.
After starting the year near a four-month low, the U.S. dollar is beginning to catch a bid, rallying through near-term resistance levels. The renewed momentum has pushed gold prices well off their recent four-month highs. However, after a strong run, some analysts were expecting to see some consolidation in the yellow metal.
Analysts have described the recent price action in gold as normal technical selling pressure. The profit-taking comes after an unprecedented 12-day run, which saw gold prices rally more than 7%. Looking ahead, analysts remain bullish on gold as it holds key support levels.
“A move back below $1,295 is needed to put a bearish spin on things,” said Chris Beauchamp, market analyst at IG, said in a research note Tuesday.
Comex February gold futures last traded at $1,311.40 an ounce, down 0.68% on the day.
Ilya Spivak, senior currency strategist at DailyFX, is also watching $1,295 as crucial initial support for the yellow metal in the near term. He added that he is not expecting to see much volatility in the gold market until the end of the week, when the U.S. Consumer Price Index report is released.
Analysts have noted that gold has been sensitive to inflation data recently as the Federal Reserve remains concerned about the economic impact of weak price pressures. Analysts have said that subdued inflation could keep the U.S. central bank from aggressively hiking rates in 2018, which would keep real rates low, which is favorable for gold.
Spivak added that he would need to see gold prices push above $1,330 to attract more buying interest.
Bill Baruch, president of Blue Line Futures, said in a research note that he sees strong support between $1,303 and $1,302. He added that he is shrugging off recent U.S. dollar strength. “The metal has remained very constructive and it’s OK to go through a healthy consolidation phase,” he said.
In a recent interview with Kitco News, Darin Newsom said that if the gold market can break resistance at $1,333 an ounce, it would have the technical potential to rally all the way to $1,381 within the first quarter. He added that he wouldn’t turn bearish on gold until prices fell to a new four-week low, which comes in around $1,240 an ounce.
Looking at the U.S. dollar index, currency analyst at Brown Brothers Harriman said that it has room to the 92.85 area as the market was “sold hard” in the final weeks of 2017.