Gold Prices See Profit Taking As US$ Bounces Of Three-Year Low
New York (Feb 19) The gold market is off its recent highs, starting the week on a soft note as the U.S. dollar bounces off a three-year low; however, analysts aren't ready to call an end to the yellow metal's long-term uptrend.
While U.S. equity markets are closed Monday for Presidents' Day, the gold market is open, with electronic markets trading until noon, ET. April gold futures last traded at $1,349.20 an ounce, down 0.52% on the day. Because of the U.S. holiday, trading volume in gold is expected to be light.
Gold's selling pressure comes as the U.S. Dollar Index has attracted some buying interest after falling to a new three-year low overnight. The U.S. Dollar Index last traded at 89.07 points. However, some analysts have noted that the U.S. dollar remains in a downtrend unless it can break resistance at 91 points.
Looking ahead, Jasper Lawler, head of research at London Capital Group, said in a report Monday, that rising geopolitical fears – with markets continuing to digest the news that the U.S. Justice Department indicted 13 Russians over interference in US Presidential election – could weigh on the U.S dollar in the near-term.
"Whilst there is still no evidence of collusion between Trump and the Russians, there are certainly jitters in the market, as investors keep in mind the adage 'there is no smoke without fire,'" he said.
Lawler added that jittery markets would continue to support gold prices in the near-term.
"A continued sell-off in the dollar and more headlines over Russia could see gold bulls target $1366 in the near term, before attacking resistance at 1380," he said.
Currency analysts at DailyFx.com said that a cautious tone in the January minutes of the Federal Reserve's monetary policy meeting, to be released Wednesday, could also put further pressure on the U.S. dollar.
However, they noted that gold, unable to break its January highs, appears to be forming a new trading channel. Some analysts have indicated that gold needs to break the January high at $1,365 an ounce to attract new buyers. The next resistance target would be the 2016 highs at $1,375 an ounce.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said in a recent interview with Kitco News, that while he is long-term bullish on gold, he doesn't think the market has enough technical momentum to push through near-term resistance.
KitcoNews
