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IGI Securities Limited – Commodity News

Karachi, January 11, 2018 (PPI-OT): Gold

Technical

Gold markets have shot much higher initially during the trading session on Monday, reaching above the $1325 level. We have rolled over since then, and it looks as if the $1325 level is going to offer significant resistance. A break above there is a very strong sign. At this point, I believe that the gold markets have a bit of a “floor” at the $1300 level, which had previously been very resistant. I believe that a bounce in that area could perhaps reach towards the upside and eventually build up the momentum necessary to continue the longer-term uptrend. Remember, gold is very volatile, and I think that you should pay attention to the US dollar in the meantime. The US dollar of course has a massive influence on what happens with the gold markets, as the 2 tend to move in the opposite direction, although not exclusively so. One should buy gold and add slowl, to build up a larger position.

Highlights

Gold prices hit a three-and a half month high this yesterday amid a sharp sell-off in world government bond markets

Officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries

The U.S dollar fell to a more than six-week low against the Japanese Yen

The Yen has been buoyed this week after a cut in the Bank of Japan’s bond buying

Holdings of SPDR Gold Trust fell 0.35 percent to 828.96 tonnes yesterday

Fundamentals

Gold prices edged up today in European trading session, after touching their highest since September in the previous session, buoyed as a rally in equities appeared to falter.

Spot gold was up 0.1 percent at $1,317.93 an ounce. On Wednesday, it marked its lowest since Sept. 15 at $1,326.56 an ounce. U.S. gold futures were down 0.1 percent at $1,319.10 an ounce.

Rising oil prices and strong global growth suggest gold will remain supported as investors look for inflation protection. Also, a highly-anticipated stock market correction is providing support on dips which continues to support the bullish gold narrative.

The New Year rally in Asian shares petered out today due to concerns about rising U.S. protectionism. Gold could test $1,327 in the short term and above which $1,362 will be opened. Global equities are running at a high level of exuberance, confidence and valuation which in short stands for a bubble.

The belief this time it is different’ is all set to get a rude shock. Spot gold looks neutral in a range of $1,311-$1,329 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao. We feel that there will be sellers on rallies.

That being said, as Chinese seasonal buying picks up ahead of the Lunar New Year, the downside should remain supported into February. Meanwhile, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.35 percent to 828.96 tonnes on Wednesday from Tuesday. Holdings fell for a second straight day on Wednesday.

Platinum was mostly unchanged at $968.24 an ounce, after touching its highest in nearly four months at $974 in the last session. Palladium climbed 0.1 percent to $1,084.40 an ounce.

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