IGI Securities Limited – Commodity News

Karachi, February 01, 2019 (PPI-OT): Gold

Technical

Gold markets gapped higher, breaking above the $1325 level, it seems that gold markets move in $25 increments. Gold prices continued to climb but there was some profit taking. Prices rose up to resistance levels, but turned back a larger than expected rise in jobless claims which weighed further on US yields. Gold prices ran into resistance near the May 2018 highs near 1,325. A close above this level would lead to a test of the 2018 highs near 1,365. Short term support is seen near the 10-day moving average at 1,296. Additional support is seen near the 50-day moving average at 1,264. Short term momentum is decelerating. The market will look to precious metals to not only mitigate problems with the US dollar, but in general concern of geopolitical problems.

Highlights

Gold prices traded higher following a sharp rise in initial weekly jobless claims

The gold market has been enjoying strong momentum as risks to the global economy rise

Lower interest rates reduce the opportunity cost of holding non-yielding bullion

April gold futures last traded at $1,330.20 an ounce, up more than 1% on the day

Gold is convertible to any currency holding preferred by many who fear inflation, currency impairment and negative headlines

Fundamentals

Gold prices were steady, having earlier hit their highest in nine months, after the U.S Federal Reserve kept interest rates steady and it would be patient on further hikes, keeping bullion on track for a fourth straight monthly gain.

Spot gold was unchanged at $1,320.01 per ounce. The session high was $1,326.30, the highest since April 26. Spot gold has gained nearly 3 percent so far this month. U.S gold futures settled up 0.7 percent to $1,319.70.

The dollar also modestly extended losses after data showed the number of Americans filing for unemployment benefits rose to a 1-1/2-year high, feeding concerns of an economic slowdown.

The ongoing trend in precious metals markets continues. The much more dovish-than-expected Fed stance continues to support commodity prices across the board, weaken the dollar and support the precious metals complex as well.

The yellow metal had already been in an uptrend prompted by earlier communications of the Fed’s softening stance on rate increases and uncertainty about a resolution of a protracted tariff spats between the U.S and China.

Global demand for gold rose 4 percent last year, as central bank purchases surged to their highest levels since 1967, the World Gold Council said. Gold has pushed solidly higher, hitting session highs on initial reaction to the latest employment data.

The metal’s rally should continue and test the next level of $1,350, a small sell-off from here would be no surprise. Wednesday’s rally was on heavy volume and looks to have trapped the shorts, giving the metals an extra boost.

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