Gold traded above the $1 200 level, after increasing the most in a week as investors resumed interest in the precious metal, but remained concerned about the possibility of a sooner rather than later increase of U.S. interest rates.
Comex gold for delivery in February gained 1.01%, its biggest intraday increase since December 1, to $1 206.5 per troy ounce by 08:42 GMT, having shifted in a daily range of $1 208.2-$1 199.5 an ounce. The precious metal edged up 0.38% on Monday to $1 194.9. The metal traded 6.21% above its four-year low touched on December 7.
“The pause in the dollar’s rally has brought some relief to gold in the short term but prices remain vulnerable in the medium term as a U.S. rate hike is imminent,” Huang Wei, a Shanghai-based analyst at Huatai Great Wall Futures Co., wrote in a note today cited by Bloomberg. “While gold may benefit if equities continue to decline, we recommend investors sell into rallies.”
Investors are concerned about that the current strong state of the US economy could push the Federal Reserve to increase interest rates sooner rather than later and thus support the dollar and pressure the non-interest-bearing gold.
The dollar was boosted by a Wall Street Journal report that Fed officials are seriously thinking about increasing US interest rate for the first time in eight years during its meeting next week.
Strong physical demand typically provides support for falling prices. However, due to the recent unstable market, gold consumers have been careful in their jewelry and bar purchases.
On Monday, the precious metal was traded with around $2 premium in China, the worlds largest gold consumer. However, prices slid today to a $0.50 discount.
“Gold will have a hard time holding on to rallies because the gains are mostly from short-covering,” said a trader in Sydney cited by CNBC. “The fundamentals regarding a strong economy havent changed and people are still very much bearish on gold because it looks like a rate hike will come soon.”
The US dollar index for settlement in December was down 0.28% at 88.800 at 08:41 GMT. The US currency gauge lost 0.35% on Monday to 88.91, but not before it increased to 89.565, its highest since March 2009. A stronger greenback makes dollar-denominated commodities more expensive for holders of foreign currencies and curbs their appeal as an alternative investment.
Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, holding slid 1.79 tons to 719.12 tons on Monday to remain near six-year lows, after a slight increase on Friday.
Pivot Points
According to Binary Tribune’s daily analysis, February gold’s central pivot point on the Comex stands $1 197.2. If the contract breaks its first resistance level at $1 207.0, next barrier will be at $1 219.2. In case the second key resistance is broken, the precious metal may attempt to advance to $1 229.0.
If the contract manages to breach the S1 level at $1 185.0, it will next see support at $1 175.2. With this second key support broken, movement to the downside may extend to $1 163.0.
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