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Investing.com – Currently rising above $ 1,700 an ounce, so what could possibly get it above $ 1,900 an ounce? Analysts remain bullish on the precious metal, but say a catalyst is needed to push forward in these areas.
After a busy week, gold managed to stay above $ 1,720 an ounce. The precious metal is attempting to rise above major resistance at $ 1,750 an ounce. But gold futures failed, ending the week at $ 1,733.90 an ounce.
“Factors that put pressure on gold, such as the risk appetite of the stock markets and the rise in the dollar index, do not appear to have a big impact on gold at current price levels.” , says Eugene Veinberg of Commerzbank.
Meanwhile, RGO’s commodities and futures trader Daniel Pavilones told KITCO News that the current business model signals the start of a rally in the price of gold.
“Market sentiment is weak compared to last August. This is a good sign. Now may be the time for gold to start to rise. Over the next week or so. , we could see a further rise in the price of gold “. Add Pavolens.
Gold is torn between two scenarios, one of which is to increase and the other to decrease. In the short term, the speed of vaccination operations and the economic recovery will accelerate, supporting risk appetite. In contrast, the Federal Reserve and the Federal Government continue to support markets, which threatens to increase inflation, which some investment banks expect to reach 2% or 2.5% in the next two months, in the interest of the price of gold.
“The breakout will not surprise me,” said Bart Melek of TD Securities. “The United States continues to be strong. It will strengthen in light of European weakness, which overshadows what drives the US dollar index up. Cash flow continues.”
He said, “In the long run, there is uncertainty. “Maybe we’ll see $ 1,900 by the end of the year due to high inflation, and the Fed has pulled out of action.” “We will also see an increase in debt and an increase in spending on infrastructure projects.”
Gold and catalysts, what to expect
Gold will not rise until there are new stimuli, analysts say.
“Gold appears stable at current price levels. Physical demand for gold provides gold as a deterrent against collapse, but the main drivers of price increases are missing from the current scene,” he said. said Sookie Cooper, Precious Metals Analyst at Standard Chartered.
Pavlonis says one of the catalysts could be the liberalization of the price of gold from the 10-year yield, as in recent times gold is falling when US Treasury yields rise. But any release of gold from this correlation will push the price of gold to penetrate. ”
And he continues: “Bond yields have risen somewhat today, but gold is still holding. This is a positive sign. Gold could soon be released. If we relate what is happening in the gold and bond markets to Biden’s announcement of the infrastructure package, we will see that the situation is adjusted to the price of gold. “”
Learn more about Biden’s $ 4 trillion stimulus program:
As Fed members held talks last week, led by President Jerome Powell, markets received a message: the stimulus continues, low interest rates continue, conditions are good, but we are waiting. an integrated recovery and the return of the labor market to full employment.
On the sideways movement of the price of gold, Pavolnes adds, “As long as we see gold in a sideways price movement for a longer period of time, that makes the course clear.
The second catalyst, Cooper adds, could be the weakening of the US dollar index. With the passage of 2021, the dollar is expected to be in a bearish direction with real returns remaining negative.
According to Han Tan of FXTM, there are other risks that could erupt during the year, including the resurgence of the Corona virus outbreak – as is currently happening in Europe – tensions between China and the United States – United, especially with the political exchange in the country. first meeting between the two countries. Tense relations because of Iran, China and Iran have therefore announced today a cooperation agreement spanning a quarter of a century.
Wait this week:
The first week of the new month marks the start of official US labor market reports, so we await the US labor market report on Friday, the AfDB data on Wednesday, the jobless claims report on Thursday, and the report. US Manufacturing PMI. Institute of Supply.
“With the signing of the massive $ 1.9 trillion stimulus package, we could see the president pushing for the $ 3 trillion package for green energy and infrastructure projects,” the officials say. ING economists. Maybe President Biden will have a hard time getting through the huge package, and he will have to convert it to smaller packages, to satisfy Republican refusals, and it won’t be easy.
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