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Gold Hits Six-Month High As U.S. Dollar Eases

Kitco News

(Kitco News) - Gold futures are maintaining recent upside momentum Monday as the U.S. dollar fades on expectations that the Federal Reserve may be done with its cycle of tightening monetary policy, traders said.

As of 8:04 a.m. EST, Comex February gold was $3 higher to $1,286 an ounce and peaked at $1,286.50, the contract's strongest level since June. March silver was up 10.9 cents to $15.545 and traded as high as $15.575, its strongest level since August.

Live 24 hours gold chart [Kitco Inc.]

"We are starting to see some good buying coming into gold," said Kevin Grady, president of Phoenix Futures and Options LLC.

The financial markets are not looking for any rate hikes by the Federal Reserve in 2019, based on the CME Group Fed watch tool, Grady said. That will hurt the U.S. dollar and translate into support for gold, he continued.

The March U.S. dollar index was down 0.205 point to 95.760.

"It seems like gold has some new momentum, particularly because of the stock-market volatility we have seen," said Phil Flynn, senior market analyst with at Price Futures Group. "People are looking for an alternative investment away from stocks and bonds.

"Gold is getting that safe-haven feeling."

No major U.S. economic reports are on the calendar for Monday but will be later in the week after traders come back from the New Year's holiday. The Institute for Supply Management's manufacturing survey is scheduled for release on Thursday and the U.S jobs report on Friday.

The employment report is generally considered the most important monthly data since a strong economy is dependent on people having jobs. Both reports are also considered significant since they are always among the first to offer a glimpse of what happened to the economy in the most recent month – in this case, December.

Strong economic reports tend to increase expectations for rate hikes, thus boost the dollar and undercut gold due to the strong inverse relationship between the two markets – and vice-versa. One of the exceptions is weak inflation data since this reduces the possibility of rate hikes.

On the charts, the first resistance point will be the psychological $1,300 level, Flynn said. "That's the number everybody is looking at," he said. Gold has not been above here since June.

Grady put the next upside technical resistance at $1,305, while Flynn listed $1,308. Flynn put chart support in the $1,260s, mentioning $1,267 in particular.

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