IGI Securities Limited – Commodity News

Karachi, January 08, 2019 (PPI-OT): Gold

Technical

Gold markets continue to try to press the $1300 level but failed as it has turned over to form a bit of a shooting star for the day. The 20 day EMA and the top of the previous uptrend in channel are both below, so there is an opportunity for buyers to come back in, but obviously it has some work to do. The $1300 level being broken to the upside opens the door to the top of the longer-term consolidation area, which is the $1400 region. To the downside, the $1250 level is massive support, and it’s very difficult to imagine a scenario where it break down below there. It would need to see significant dollar strength, which is starting to see the US dollar rollover in general, so it does make sense that Gold would rally. Unless there is some type of major turnaround with the greenback, it does not see any opportunity for gold to break down.

Highlights

Softness in the U.S dollar also offered a runway for gold to rise

The precious metal complex is fairly well supported given the loose monetary turn coming out of the Fed

A weakening dollar and falling U.S Treasury yields should keep gold pushing higher

The 10-year U.S Treasuries yield are down more than 50 basis points from its October peak of 3.261 percent

Lower Treasury yields can translate into less demand for the dollar since the currency is used to buy bonds, a traditional safe haven

Fundamentals

Gold held steady today as bets on a pause in U.S interest rate hikes and hopes of a Sino-U.S trade deal put pressure on the dollar, but an improved risk appetite capped gains for the safe-haven metal.

Spot gold was little changed at $1,287.70. It hit a more-than 6-month peak at $1,298.42 on Friday. U.S gold futures eased slightly at $1,288 per ounce. It is seeing investors returning to the gold market on dips as the dollar weakness supported prices.

Gold still has some room to move higher as the dollar is weakening and that would be an offset to stabilizing stocks. If prices move above $1,300, it would reassure investors to add more long positions.

The dollar index stood near 2-1/2-month lows as investors grew increasingly convinced that the Federal Reserve will not raise interest rates this year amid uncertainties over the U.S economy.

Gold gains when expectations of interest rate hikes ease because lower rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, in which it is priced.

Gold fell about 0.7 percent in the previous session, its biggest one-day decline in about two months on the back ofrobust U.S jobs data, but has recovered since.

The main trend remains bullish for gold. From a technical point of view, investors are now watching the two key levels of$1,277 and $1,300, which are new support and resistance levels respectively.