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Update: Gold Pushes Above $1,300, First Time Since Late May

By Debbie Carlson Kitco News
Thursday June 19, 2014 10:30 AM

Editor's Note: Updating with new price information, commentary

(Kitco News) - Gold futures pushed above $1,300 an ounce for the first time since May 22, spurred on by technical-chart buying, a weaker U.S. dollar and the sense the Federal Reserve remains dovish.

The market is also getting underpinned by the continued geopolitical concerns out of Iraq and militants trying to take control of more cities there.

At 11:30 a.m. EDT, most-active August gold futures on the Comex division of the New York Mercantile Exchange are up $25.70 an ounce at $1,298.40. It rose as  high as $1,300.50. Silver is up 56.7 cents at $20.345.

Gold prices have been stronger all session, starting with the early trade, said Sterling Smith, futures specialist for Citibank Institutional Client Group. The early gains were likely fueled when August gold futures took out some technical-chart resistance around $1,284, which is where the 50-day moving average was.

“That likely took out some (buy) stops and pushed it higher,” he said.

Buy stops are preplaced buy orders that are triggered when prices move above certain levels.

The momentum generated on the technical-chart buying propelled prices through the 200-day moving average and 100-day moving average, traders said. The weaker U.S. dollar and technical chart momentum fed off each other, Smith said.

Gold trading volume is much higher Thursday than it has been in previous trading sessions, said Tommy Capalbo, precious metals broker at Newedge. He said about 121,000 lots traded so far Thursday, compared to about 65,000 to 70,000 in recent sessions.

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He said as market participants thought about what Federal Reserve Chair Janet Yellen said following the Federal Open Market Committee meeting Wednesday - the Fed is continuing on a steady course - it encouraged some buying at the lower levels.

“We knew they were going to continue to taper. And the economy is slowing improving (but not much). There’s still room for gold. God forbid something happen in Iraq,” he said.

Frank Lesh, broker and futures analyst with FuturePath Trading, said it may have taken gold traders a day to realize Yellen “didn’t do anything different,” and that realization changed the perception that the Fed will now delay when it ultimately raises interest rates, which is supportive to gold.

Capalbo said what will be important for gold is whether or not it can close above $1,300 Thursday; that would be a positive sign.

He said Thursday’s volume likely is a combination of short covering, which is buying back of previously sold positions, and new buying. “I think it’s a combination of both, but I don’t think the buying is with a view of long-term upside,” he said, as gold’s near-term trend is still weak.

George Gero, vice president with RBC Capital Markets Global Futures, said bargain hunting came into gold, and noted that the price spread between the August and December futures widened out a bit, “which is starting to reflect some buying interest,” which has been otherwise absent in the yellow metal.

“There have been too many bears in the woods this year due to very strong stocks, and funds had been under-invested in gold for some time. With all the turmoil in the Middle East, Ukraine-Russia, inflationary crude and softs, clients are asking fund managers if they are returning to gold,” Gero said.

He added that the rising moving averages, higher volume and rising open interest could attract momentum-type buyers. “A close over $1,350 would change the negative technical picture,” he said.

By Debbie Carlson dcarlson@kitco.com
Follow me on Twitter @dcarlsonkitco



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 precious metal products, 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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