Weak gold price momentum targets $1,500 - analysts
David Song, currency strategist at DailyFX.com, said in a report Monday that as geopolitical tensions ease, the gold market could be ripe for technical profit-taking as short-term momentum begins to shift.
“[The Relative Strength Index] may flash a textbook sell signal over the coming days as the oscillator struggles to hold in overbought territory,” he said in the report.
Song added that after gold’s failed attempted to close above $1,591 an ounce, he is watching a retracement level at $1,509 as a critical support level. His comments come as gold prices see some modest selling pressure. February gold futures last traded at $1,551 an ounce, down 0.58% on the day.
“[Gold needs] a close above $1,591 to bring the topside targets back on the radar, with the first area of interest coming in around $1,625 to $1,634,” he said.
Song is not the only one watching the $1,500 level. Technical analysts at the Swiss trading firm Dukascopy said that if gold pushes below $1,540, then they see prices converging to the precious metal’s 55-day and 100-day moving average around $1,500 an ounce.
“For a time being, it appears, on the daily candle chart, that a retracement down should occur due to the metal being overbought,” the Swiss analysts said.
Although gold prices could still move lower in the near term, Song said that the fundamentals still support higher prices through 2020. He noted that growing concerns of disappointing economic growth this year will keep interest rates low.
“Geopolitical risks paired with speculation for lower interest may keep gold prices afloat as market participants look for an alternative to fiat currencies,” he said.