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Gold Has Room To Move Lower On Technical Momentum – Analysts

By Neils Christensen of Kitco News
Tuesday February 17, 2015 1:43 PM

(Kitco News) -Technical factors are the biggest driver for gold, as the market sees little need for safe-haven investments, and that prices have room to move lower in the near-term, according to analysts.

A break below the 100-day moving average, around $1,218 an ounce, created some strong selling pressure and pushed gold to a five-week low - testing support just above the key psychological area of $1,200 an ounce.

As of 1:38 p.m. EST, Comex April gold futures were trading at $1,207.6 an ounce, down $19.50 or 1.59% on the day.

Bill Baruch, senior commodity broker at iiTrader, said the break below $1,218 level created significant momentum for the bears in the marketplace and now he is looking to see if support will hold around $1,199.60. If that breaks, there is a strong possibility that gold falls back to the $1,130 area in the medium term.

“I think we can see this weakness continue if we see a close below $1,218,” he said. “The U.S. dollar has continued to consolidate off its lows and that will continue to pressure all commodity prices.”

Baruch added that he is surprised that gold was not able to hold near-term support as uncertainty over Greece exiting the eurozone and continued conflict in the Ukraine should create some safe-haven demand for the yellow metal.

Michael Boutros, currency strategist at DailyFx, said he has been bearish on gold since last week as the market broke below the $1,251 to $1,248 area. He added the current momentum could continue to push prices the $1,195 region.

“I think we will get another drop and we will see if we can hold that area,” he said. “If we can’t bounce off the $1,200 back up to $1,248, then I think we could head back to $1,171 and eventually last year’s lows.

Sean Lusk, director of commercial hedging with Walsh Trading, said that with the physical buying period now over, there is a good chance prices continue to trend lower. He added that money continues to flow into the U.S. dollar and equity markets.

Although there is room to move lower on the downside, Lusk said that he would expect any drop to $1,180 area will be bought back “with a vengeance.” But looking at historical trends, that might not happen until the second half of the year.

“We are entering a slower time for the gold market, so we could see prices trend lower and consolidate for a while,” he said.

Mark Leibovit, editor of the VR Gold Letter, said that he would not recommend chasing gold prices lower as the fundamental picture continues to support gold prices. However, he added that it is not the time to buy on a dip.

“As a trader I am on hold in the gold market. The whole world is in a bull market except for gold in U.S. dollars and I think you need to be aware of that,” he said. “I wouldn’t want to try going to pick a bottom. I would need to see some upside.”

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By Neils Christensen of Kitco News; nchristensen@kitco.com



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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