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Now That Gold Is Rallying, Here Is The Next Key Level To Watch - Analysts

Kitco News

Now That Gold Is Rallying, Here Is The Next Key Level To Watch — Analysts

(Kitco News) - With this overdue gold rally finally setting in and gold prices at six-week highs, analysts are anxiously eyeing the next key resistance level in hopes of seeing a sustainable move up.

Following global equity sell-off and weaker-than-expected U.S. inflation data, gold finally saw the strength that was sorely missing these past six months.

December Comex gold futures powered to six-week highs and were last trading at $1,222.40, up 2.43% on the day.

“Gold’s move is overdue given the big equity decline yesterday,” London Capital Group head of research Jasper Lawler told Kitco News on Thursday.

Investors seemed to have been waiting for the U.S. inflation data this morning before reacting to the massive drop in the U.S. equity market on Wednesday, with the Dow alone dropping more than 800 points, noted Lawler.

“Gold traders were looking to get the CPI release out of the way before seeing a green light to start buying up for this breakout. Technicals were leading up to this and hopefully we’ll get more out of this,” Lawler said.

Live 24 hours gold chart [Kitco Inc.]

The next important step for gold is to close above the $1,220 an ounce level, which will determine whether or not gold can continue to move higher or at least retain its recent gains in the short-term, according to analysts.

“We need a close over $1,225 and we need the following day to open up stronger. That is how gold prices could move up to $1,250 and even as high as $1,266 — the 200-day moving average,” RJO Futures senior market strategist Phillip Streible said.

Weaker CPI data along with continued pressure in the equities space, throw in a wrench in the Federal Reserve’s tightening plans, suggesting that the central bank might not be as aggressive going forward, Streible added.

Other analysts are in agreement that $1,220 an ounce is the next resistance point.

“$1,220 is the key. A close above that opens the door for a big rally, while a close below would mean that gold remains in consolidation,” said Bubba Trading chief market strategist Todd ‘Bubba’ Horwitz said.

Gold is also showing signs of getting its safe-haven demand back, with investors shifting their attention not only to risk-off assets but to gold in particular.

“Gold is now a decent hedge or a haven play, particularly for those investors who have to be invested and are concerned about [the equity space],” Lawler said.

Extreme net short gold positions have played a key role in this rally as well, said Kitco’s senior technical analyst Jim Wyckoff, who sees gold possibly hitting $1,250 an ounce.

“Chart-based buying interest has kicked in after buy stop orders were triggered in the gold futures market when prices pushed above key technical resistance levels. Now, the door is opened to push in prices to $1,250.00, or above, in the coming few weeks, including a price uptrend likely to be sustainable at least into the end of the year,” Wyckoff said.

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