'Gold To Be Relegated': Bulls Disappointed With Gold Pausing After Rally - INTL FCStone
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(Kitco News) - Gold’s short-term outlook is bound to disappoint, with INTL FCStone projecting for the yellow metal to “be relegated” back to its $1,275-1,290 trading range.
The precious metal’s prices paused on Tuesday after rallying to just above $1,300 an ounce on Monday. Gold received a strong boost as the markets opened on Monday amid a major stocks sell-off that was triggered by the escalating trade tensions between the U.S. and China.
On Tuesday, U.S. equity markets recovered and the U.S. dollar index was trading firmer at 97.53. At the time of writing, June Comex gold futures were trading at $1,298.10, up 0.14% on the day.
“In terms of our outlook on gold, bulls obviously had to be disappointed with Tuesday’s performance, especially as Monday constituted a breakout of sorts to the upside, which never got going,” INTL FCStone independent consultant Edward Meir wrote in a report on Tuesday.
Gold has a very unexciting, but a very likely trajectory from here — back to its more familiar trading levels of around $1,285 an ounce, where prices have good support.
“We think gold will likely do more ‘backing and filling’ for the time being and possibly be relegated to its recent trading range barring more decisive moves in the U.S. stock market,” Meir said.
U.S. stock market will remain one of the key drivers for gold, the report pointed out, noting that geopolitical tensions between the U.S and China will continue to guide market sentiment.
“In addition to rising equity and currency variables, slightly more upbeat talk with regard to the US/Chinese trade situation seemed to pressure gold. In this regard, President Trump said that the talks with China ‘have not collapsed’ and both sides expressed optimism that they would reach indeed a deal,” Meir explained.
INTL FCStone added that the trade rift is looking less critical at the moment, with Trump describing the trade tensions as “a little squabble.”
Meir highlighted that Trump’s comment seems to be “oblivious to the fact that his decisions are whipping up trillions of dollars in market movements, not to mention the paralysis they are causing on the investment side of the ledger.”