Gold Gaining Momentum As It Tests Upper Boundaries
(Kitco News) - Cautious optimism is starting to build in gold once again as the market has managed to hold key support and is starting the week testing key resistance, according to some analysts.
The yellow metal has been trading in a narrow, almost $20 range for nearly two weeks between support at the 200-day moving average at $1,262.10 an ounce and resistance at the 100-day moving average at $1,278.40 an ounce.
Bouncing off a one-week low Monday, prices are now trading at the top of its range; December gold futures last traded at $1,282.60 an ounce, up 1% on the day.
Bill Baruch, president of Blue Line Futures, said that he sees potential in gold as the market holds onto technical strength, with its trading channel.
"Major four-star support has appeared to win once again. Price action traded to a low of 1265.9 on Friday, but this is a second higher low since early October and we now have a trend line within this rare four-star level,” he said in a research note. “We remain bullish and are very upbeat on this constructive price action to start the week.”
Colin Cieszynski, vice president of the Canadian Society of Technical Analysts, said that he also sees potential for gold as the market appears to be getting a boost from rising oil prices.
He noted that oil has pushed to a two-year high, breaking out of a “massive-technical base.”
Oil prices are breaking out, copper has broken out of its base and I think this broad-commodity rally could benefit gold prices,” he said. “It’s good for equities as it shows a strong global economy, but money should also flow into gold.”
As for the argument that gold is suffering from competing assets like equities and bitcoin, Cieszynski said that he doesn’t think that argument holds much weight.
“Ultimately, gold is money. It goes in and out of favor but it never stops being money,” he said.
While gold is showing renewed technical potential, Cieszynski said that the market still has some strong resistance levels.
He added that the market won’t regain its full bullish momentum until prices push above $1,305 an ounce. “It needs to break $1,300 and hold that before investors come back.”
Baruch sees initial resistance at $1,291.30 with the next level at $1,308.40.
Chris Beauchamp, market analyst at IG, said that he needs to see gold push above $1,290 to break out of its current channel.