Once again, all eyes are on $ 1,300 worth of gold next week as the US dollar remains resilient – Analysts



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(Kitco News) – Once again, $ 1,300 an ounce has once again become a priority as the strengthening of the US dollar and improved risk sentiment should weigh on the price of gold next week, according to some analysts. market analysts.

The gold market is starting a new month in the background as prices fall below the critical threshold of support, falling to five weeks. Sales pressure comes one week after prices hit a 10-month high. The gold futures on April traded for the last time at $ 1,300.30 an ounce, down 2.4% from the previous Friday. At the same time, the US dollar traded for the last time at 96.45, up 0.24% over the day.

According to some analysts, the gold market is trading at a critical support level.

"Gold has surpassed the upward trend line of support," Joshua Mahony, market analyst at IG, said Friday. "If we see a break below $ 1,303, it looks like we're ready for a period of weakness, with the market making some of the gains over the last four months."

The weakness of gold comes from data showing a moderately resilient economy; On Thursday, data showed that the US economy was stronger than expected in the fourth quarter of 2018. However, other data released on Friday showed a slowdown in the manufacturing sector last month and a drop in personal income in January.

Fawad Razaqzada, technical analyst at City Index, said the data was not as weak or consistent as some economists expected, which supports the renewed interest of the US dollar and pushes the bond yields down, as investors find it less necessary to protect themselves from having assets.

"At the moment, we see only pockets of weakness, nothing constant and this will have an impact on rate expectations," he said. "We really need to see ever weaker data to push back the rate hikes this year and drive up gold prices."

Ole Hansen, Head of Commodity Strategy at Saxo Bank, acknowledged that it all depended on interest rate expectations and that data began to challenge the market's dovish sentiment.

"At present, the market is less prepared for higher interest rates, so any data indicating positive economic growth will cause a change of sentiment and will weigh on the price of the price." gold, "he said.

Hansen said that he could see persistent weakness of gold in the near term due to changing investor sentiment. However, he added that gold still remained in a positive uptrend.

"I think in the short term we could put the support at $ 1,300 and I think the level to watch will be $ 1,275 because it's a key level of support and retracement of this rally, "he said.

Razaqzada said that if the price of gold can fall, he believes that this sale is only a correction of the more general uptrend. He added that because of persistent concerns about global growth, bond yields could not stay at their current high levels. He added that it does not take much to scare investors.

The US dollar remains a key threat to gold

Neil Mellor, chief foreign exchange strategist at the New York Mellon Bank, said economic problems with the brewery in the eurozone would provide additional support for the greenback.

Next week, the European Central Bank (ECB) will hold its meeting on monetary policy and investors will see how the increasing risks to the planet will weigh on the region's prospects for economic growth.

"When there is a world of uncertainty in the market, investors have little choice and are supportive of the US dollar," he said. "The ECB is facing many problems and we do not know how it will deal with them, especially if most of its ammunition has been used."

But it's not just the strength of the US dollar that is currently hurting gold demand. Mellor said the weak growth in inflation also reduces the need for investors to hold the yellow metal.

"I think gold should fundamentally weaken as the world enters a phase of weak growth. Due to low growth and low inflation, there will not be much at gold counters, "he said. "There is no inflation in the world. We have a structural problem of low inflation. "

All eyes on US employment data

For many analysts and economists, next week the focus will be on the February employment data, which will be released on Friday. However, the number of jobs created tends to focus on rapid wage growth.

While positive economic data may continue to support the US dollar, Hansen said he still saw only limited potential as risks to global growth increased, particularly in Europe and China.

"Global growth looks like a super tanker. its momentum slows down and you can not just press a button to restart it, "he said.

In addition to employment data, markets will pay particular attention to data from the ISM services sector, following disappointing figures from the manufacturing industry on Friday. Markets will also receive new home sales figures. The housing sector has severely dampened the US economy and many new home buyers have been pushed off the market due to rising home values ​​and rising interest rates, which pushed mortgage rates higher.

Warning: The opinions expressed in this article are those of the author and may not reflect those of the author. Kitco Metals Inc. The author has endeavored to ensure the accuracy of the information provided. However, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. This is not a solicitation to exchange merchandise, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept liability for losses and / or damage resulting from the use of this publication.

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