$1,340 could be an immediate resistance level and we might reach $1,400 in the first quarter this year
The emergence of Bitcoin probably isn’t a game changer in the precious metals arena (yet)
The late-year rally in gold was fuelled by a weaker dollar, short-covering and some renewed safe-haven buying prompted by global political uncertainties. Another key factor which should help to make the coming weeks bullish for gold is the crude oil price. The rally, which began on December 11 when gold prices hit an intraday low of $1238 per ounce (31.1035 gram), continues into the New Year. Respectable gains are the eighth consecutive day on Tuesday that gold prices have moved higher. Gold head for the longest stretch of gains since mid-2011, recent price gains in gold resulted in gains of roughly 14% in 2017, with 3% of the gains occurring in December of last year.
U.S. gold futures dropped to $1,310, after the release of the minutes from the latest Fed meeting when the US central bank decided to raise rates by 0.25%. The slide took place amid a rally of the greenback on the back of the minutes. Dollar Spot Index lost 8.5 percent in 2017. Speculators have been increasing their long gold positions and, according to the most recent C.O.T. (commitment of traders) report, have increased their net long positions to 107,800 contracts, a 40% increase. The precious metal earlier on Wednesday hit $1,321.33, its highest level since 14 September.
The dollar index, in which the gold is priced, was up at 91.53 after falling to a more than three-month low Tuesday. A weakening dollar could boost dollar-pegged commodities, like gold, as they become more attractive to foreign investors. The greenback posted its biggest annual drop since 2003 in 2017, helping gold to an annual increase. Bullion surged $74 an ounce in the last three weeks of 2017 alone. Gold’s medium-term outlook appeared positive. At this moment we are expecting some kind of inflationary expectations. People are more optimistic with stock rally are also expecting returns in commodities including gold.
We should tap the short term opportunities to go long as gold has crossed $1,300 with a momentum. It may act as a support, while $1,340 could be an immediate resistance level and we might reach $1,400 in the first quarter this year. Spot gold may break a resistance at $1,326 per ounce and rise towards the next resistance at $1,380 in three months, as suggested by its wave pattern and a Fibonacci ratio analysis.
Financial analysts now hold a more optimistic view about the eurozone economy and traders wonder how much the U.S. tax reforms will actually boost its economy. On the other hand, the strong gains in U.S. equities limited gold's rise. U.S. Dow Jones Industrial Average went up 57.68 points, to 24,776.90 points. The S&P 500 and Nasdaq followed Dow's upturn. Fed policy makers are projecting another three hikes in 2018, while other central banks around the world have also shifted toward a tighter monetary stance, with the European Central Bank planning to halve its asset purchases starting this month.
The precious metals markets have historically proven to be subject to boom and bust cycles with the best booms occurring after lengthy bust cycles. The emergence of Bitcoin probably isn’t a game changer in the precious metals arena (yet). Date: 5-1-2018