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Comex Gold Makes Technical Breakout Amid Geopolitical Tensions; Buy Stops Hit
By Allen Sykora Kitco NewsThursday July 10, 2014 8:41 AM
(Kitco News) - Gold futures hit a 16-week high Thursday in a market buoyed by Mideast geopolitical tensions and relief that the Federal Reserve has not done anything to move ahead the possible timeline for tightening of monetary policy, with buy stops accelerating the gains.
This enabled the metal to rally sharply despite one bit of disappointing news – India did not relax the restrictions on gold imports into the country.
As of 8:21 a.m. EDT, gold for August delivery was $21, or 1.6%, higher at $1,345.20 an ounce on the Comex division of the New York Mercantile Exchange. The contract traded as high as $1,346, its most muscular level since March 19.
“Silver went along for the ride,” said Jonathan Butler, precious-metals strategist with Mitsubishi Corp. September silver was up 52.7 cents, or 2.5%, to $21.595 an ounce. It peaked at $21.63, its strongest level since March 14.
Gold made a technical breakout, said Bernard Sin, global head of precious metals trading with MKS (Switzerland) SA. The key chart area that the market poked above was around $1,335, Butler said.
For the futures, August gold had peaked at $1,334.90 on July 1, and technical analysts told Kitco News Wednesday that this would be a key breakout area where buy stops might be activated. Stops are preplaced orders triggered when certain price points are hit.
The market was boosted by geopolitical tensions surrounding the Middle East, Sin and Butler said. Fighting has been occurring in Iraq for some time now. However, tensions surrounding Israel are now picking up as well, with the country reported to be have escalated its aerial assault in the Gaza Strip and mobilizing troops for a possible invasion, all in response to rocket attacks. The fighting has been described by ABC News as the heaviest since an eight-day battle in late 2012.
Butler also cited the late-Wednesday release of minutes from the June meeting of the Federal Open Market Committee as yet another factor underpinning gold. The minutes showed policy-makers envision ending their asset-purchase program, known as quantitative easing, by the end of October, largely as markets anticipated. However, Butler added, “there was no real indication as to when benchmark interest rates may rise other than tacit confirmation of sometime later in 2015. So there may be somewhat of a relief rally going on in relation to that.”
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There were hopes going into Thursday that the new Indian government led by Narendra Modi would ease restrictions on gold imports put into effect last year to counter a wide current account deficit. However, no changes were announced after a budget meeting.
India historically was the world’s largest gold-consuming nation before it was overtaken by China last year.
“That (no change) is bearish for gold because the market was expecting a lot of good news,” Sin said. “However, we traded higher because there was a technical breakout and stop levels.”
Gold likely would be higher yet if India had eased the import rules, he added.
By Allen Sykora of Kitco News; asykora@kitco.com
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