IGI Securities Limited – Commodity News

Karachi, January 02, 2019 (PPI-OT): Gold

Technical

Gold markets tried to rally during New Year’s Eve but rolled over to show signs of reluctance to go higher. Short-term pullbacks should have plenty of buying opportunities underneath present themselves to at least the $1250 level. Looking at this market, it makes sense that Gold is going to rally as the US dollar is facing a bit of bearish pressure as the Federal Reserve has taken a break from its hawkish stance. At this point, the Gold markets will continue to try to reach towards the $1300 level, perhaps even the $1400 level over the longer-term. The longer-term charts, the $1200 level on the bottom is support while the $1400 level on the top. Expect a lot of volatility and expect buyers to come in and pick up value as it appears. The 50 day EMA will offer support, and there are probably a multitude of areas between here and there that could also jump in and push the market higher.

Highlights

The stock market may largely stay sideways, which may support gold

Demand for gold should be strong in the first quarter due to seasonal factors

Globally, gold traded near a more than six-month peak but was headed for its first annual decline since 2015

The world’s second-largest economy, darkened the mood and erased early gains in U.S stock futures

While economic growth may slow, it will still remain healthy overall. That will hold down any safe-haven buying

Fundamentals

Gold prices rose today on demand for safer investments amid falling equity markets and concerns over the outlook for global economic growth. Gold prices are set to rise in current year as the US Federal Reserve slows the pace of interest rate hikes. Yet, it is not expected that yellow metal to run away on the upside, as the economy will remain strong.

Spot gold rose 0.1 percent to $1,283.61 an ounce, near a six-month high of $1,284.09 reached on Monday. U.S gold futures rose 0.3 percent to $1,284.80 per ounce.

It looks very optimistic and fundamentally supportive for gold as the overall mood is still very uncertain and the market confidence is still weak on global growth worries.

There are expectations that a three-year rate-hiking cycle in the United States has come to a close. Markets currently expect no rate hikes next year. A halt in interest rate increases would be beneficial for non-interest bearing bullion.

Trade concerns, Brexit and the U.S Government shutdown continue to provide support to precious prices, with $1,300 acting as the major top-side resistance for gold.

U.S President Donald Trump said on Saturday that he had a “long and very good call” with his Chinese counterpart Xi Jinping and that a possible trade deal between the United States and China was progressing well.

Gold should benefit in many ways if US economic growth and monetary tightening slows. An end to rate hikes may stem the rise in the US dollar, which can help gold as the metal moves inversely against the greenback.