IGI Securities Limited – Commodity News

Karachi, January 07, 2019 (PPI-OT): Gold

Technical

Gold markets initially rallied during the week. The $1300 level of course is a psychologically important figure, and the fact that it turned around of form a hammer after the brutal candlestick on Friday suggests that perhaps Gold is going to continue to be very noisy. At this point, the $1250 level underneath will be supportive, and perhaps even the top of the up trending channel that it just broke out of. At this point, the market participants will be looking for value, as gold has certainly broken out to the upside. Ultimately, it is probably going to go looking towards the $1400 level, but if it did break down below the $1250 level, then it could drop back down to the $1200 level. This pullback will be looked at as a nice entry though, so be patient and look for buying opportunities this coming week, especially if the US dollar gets hammered again as it will lift the value of gold by default.

Highlights

Gold prices helped by a weaker dollar on expectations

A relief rally in Asian equities triggered by the Fed’s dovish stance and strong U.S jobs data limited the yellow metal’s upward momentum

Gold has performed well over the past few weeks, an important reason for this has been increased equity volatility

There is potential for gold to spike to $1,365 in 2019

A combination of rising open interest on Comex and the gold price going up shows that new longs are coming into the market

Fundamentals

Gold prices edged down as equities rose on a recovery in risk appetite following comments by U.S Federal Reserve Chairman Jerome Powell that the central bank would be patient and flexible in steering the course of interest rates.

Spot gold had dropped about 0.1 percent to $1,284.05 per ounce. U.S gold futures were down about 0.1 percent at $1,285.10 per ounce. The dollar index, which tracks the greenback against its major peers, inched down.

The Fed chairman on Friday sought to ease market concerns that the U.S central bank was ignoring signs of an economic slowdown, saying he was aware of the risks and would be patient and flexible in policy decisions this year.

Investors had expected the Fed to stay on its tightening path after three hikes last year, but the ongoing trade war and recent disappointing corporate earnings have put those expectations to rest.

Given the uncertain financial market climate, gold should continue to flourish, and for those that have missed the boat, pullbacks could be an excellent opportunity to engage.

US equities tumbled in December, the holdings of gold-backed exchange traded funds rose by 2.25m ounces, helping to drive the price of the metal to six-month highs of more than $1,290 a troy ounce.

It forced funds that had placed speculative wagers against gold in the US futures market to cover their positions, sending the market from a net short to a net long position, where bullish wagers outnumber bearish bets for the first time since June last year.

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