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Gold Analysis: Everything Pointing To Lower Gold Prices - ANG Traders

Kitco News

(Kitco News) - Even if gold prices have bounced to daily highs, analysts at ANG Traders expect the metal’s upside to be limited, warning it may not be the right time to get back in yet.

Based on their analysis, the $1,300 level will remain heavy resistance for the yellow metal.

“[A]fter the bounce, the most likely scenario is a resumption of the downtrend which should eventually take gold down to the $1,210-1,200 zone,” they wrote in a Seeking Alpha post Tuesday.

“Therefore, we do not think it is safe to get back in on the long side just yet.”

Gold posted solid gains Tuesday as the U.S. dollar fell under pressure. The metal traded near session highs and closed in on $1,300 an ounce. December Comex gold futures last traded up 0.73% at $1,294.10 an ounce.

However, according to ANG’s analysis, most scenarios suggest further downside for the metal.

“The negative long-term technical picture, however, makes it unlikely that the $1,300 level will be breached,” they wrote. “Evidence of a new bull market in gold has yet to materialize.”

At the same time, gold’s correlation to U.S. treasuries and the dollar would suggest more pressure for the metal.

“The dollar, after forming a series of higher-lows, has broken above its 92.50 resistance and is likely to continue rising along with Treasury rates,” they said. “The bias for rates is definitely to the upside, aided by the Fed's plans for reverse QE (balance sheet reduction). This will continue to put pressure on the gold price.”

Likewise, the USD/JPY pairing has a strong negative correlation to gold, which if continues to move higher would “add to the pressure of gold,” the analysts noted.

When looking at inflation, they pointed out that as the Federal Reserve looks to be on track to raise rates and reduce its balance sheet, “gold has no inflation-based reason to appreciate in price.”

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