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A Break Of $1,300 Could Push Gold To 2016 Highs

A Break Of $1,300 Could Push Gold To 2016 Highs



 (Kitco News) - Renewed safe-haven demand has helped generate strong momentum for gold as the market has pushed through key levels, but more work needs to be done to confirm the long-term uptrend, analysts say.

The latest move in gold, which has pushed prices within striking distance of $1,300 an ounce, started Friday following weaker-than-expected U.S. employment data. The report caused investors to shift their expectations for Federal Reserve interest-rate hikes later in the year. This created significant weakness in the U.S. dollar and pushed 10-year bond yields to their lowest levels so far this year.

The question now on most traders’ and investors’ minds is what will be the next levels to watch after prices break the psychological barrier at $1,300 an ounce. August gold futures last traded at $1,296.10 an ounce, up 1% on the day.

“My gut is telling me that gold is entering a new long-term bull uptrend but we need to see technical confirmation before we get too excited,” said Karen Jones, technical analyst at Commerzbank. “I have just been waiting for this downtrend to turn around.”

She noted that gold, as it pushed above $1,285 an ounce, broke a six-year downtrend. She said the next important milestone is a weekly close above the April high at $1,295 an ounce.

She added that if gold breaks through $1,300, she could see the market testing last year’s high by August.

“I think the range between $1,375 and $1,400 would be a strong magnet for the market,” she said.

Daren Newsom, senior analyst at Telvent DTN, is also watching for a weekly close above $1,295. He added that he could see gold pushing to $1,317.70 before the market looked overbought

“However, we appear to be in a fifth wave of a five-wave move and momentum could propel gold through $1,317 to the 2016 highs at $1,377 an ounce,” he said.

While optimism is strong in the marketplace, Maxwell Gold, director of investment strategy at ETF Securities, warned that for these gains to be sustainable, investors have to wait for next week’s Federal Reserve monetary policy meeting.

Expectations are growing for a “dovish hike,” in which the U.S. central bank raises interest rates by 25 basis points but signals a cautious approach for further rate hikes.

“A slower pace of interest rate hikes and higher inflation could push gold to last year’s highs,” he said.

While analysts at iiTrader are bullish on gold, they warn that investors shouldn’t chase the markets at these levels. They noted that renewed strength in the U.S. dollar could create some profit taking among gold investors.

By Neils Christensen

For Kitco News


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