Gold Rally Expected By End Of December - Peter Hug
(Kitco News) - The market is “extremely nervous” as the end of the year approaches, said Kitco’s global trading director Peter Hug, cautioning traders to hold onto their gold investments.
“This market is extremely nervous . . . From an investors’ perspective, this is absolutely the time you need to hold insurance,” Hug told Kitco News on Friday, saying that any slight movement in the political sphere can have massive repercussions on the stock market.
Gold’s price pattern during the last month of the year will likely resemble that of December 2016, Hug added.
“The charts look similar to 2016 in December, where the first part of the month looks like it might be weaker and then rally through December back into January. We might see a similar pattern reappear this cycle,” he said.
One of the main reasons for a rally is that the market already priced in the December rate hike by the Federal Reserve, Hug pointed out, adding that the central bank is unlikely to be as aggressive as estimated by analysts in 2018, which would boost gold.
“The December rate hike is in the market, it has been in the market for a while,” Hug said. “Some analysts indicated that the Fed may [raise rates] three or four times next year. I just don’t see it in the cards, unless there is some really significant uptick in growth in the U.S. economy and we start getting more fiscal stimulus out of Trump administration.”
Either way, for those interested in trading the technical levels by buying support and selling resistance, there will be plenty of opportunity throughout December to make money, according to Hug.
“Major levels to break through on either side for gold are $1,265-$1,297. From a technical perspective, $1,265 remains a major level that needs to hold and I think it will hold through December,” he said. “On the upside, gold needed to close above $1,297 level to have the integrity to move and stay above the $1,300 and it failed at $1,297 twice and just sold off on the strength of the equity market.”
But, the equity market could be rallying prematurely, Hug added. "The equity markets have priced in an absolutely perfect scenario of tax plan going through. I still don’t think the jury is out on that call. And I am still not convinced that the tax reform will get that type of growth they are anticipating.”