Gold Opens at 7-week-high

October 12th, 2015 by

dubai_gold_arabian_businessSpot gold continued to build upon its rally to end last week, popping about $9 per ounce higher (+0.78%) to $1,166/oz when trading opened in New York this morning. The gold price had actually touched a 3-month high on international exchanges overnight around $1,169/oz, approaching a major technical resistance level at $1,170 per ounce. If gold can close above this key level this week, it may very well be poised for a breakout higher, according to technical analysts.

At one point this morning, gold touched as high as $1,170.40/oz in New York.

Gold may be getting a bit more of its share of the attention today due to banks and the bond markets in the U.S. being closed fro Columbus Day. The rest of the financial markets are still open, however. Stock indices in the States were choppy but largely unchanged.

Silver rose better than 1.1% to $16.10/oz while platinum gained $16 per ounce (+1.6%) to just above $1,000/oz. Palladium was flat around $716/oz.

Technically Speaking

With its recent surge, the gold price is charting a path higher in the foreseeable near-term that may be drawing stronger bullish sentiment for the precious metals. This has happened even without significant weakness in the dollar: the Greenback was only off marginally this morning, about 0.05% lower to 94.8 on the DXY index. The dollar has been slightly lower but steady of late. This lends credence to the perspective that gold’s technical fundamentals are improving, prompting the metal to rise on the merits of robust demand and weaker economic growth projections around the globe.

Source: Saxo Bank, via mining.com

Source: Saxo Bank, via mining.com

Many technical analysts have zeroed in on the $1,170 price level for gold, which the yellow metal hasn’t closed above in almost 14 weeks, since late June. According to the analysts, if gold can manage a closing price above the $1,170-per-ounce range, this is a strong indication that the gold price could rally higher back above $1,200/oz or even $1,250/oz. Lowered expectations about how eager the Federal Reserve is to hike interest rates this year is also giving the precious metals a boost.

Fed Expectations

ATL Fed Pres. Dennis Lockhart. Source: ValueWalk

ATL Fed Pres. Dennis Lockhart. Source: ValueWalk

The market’s expectations for the Fed’s next move has been getting almost endless attention from the news media, so it has naturally been the main sentiment driver for rising gold prices. Atlanta Fed President Dennis Lockhart, generally a policy hawk, has even derided the rampant speculation about the timing of the first rate hike by comparing it to the incendiary O.J. Simpson murder trial in the mid-1990s. (Probably a poor choice for a comparison.) What some have concluded Lockhart meant was not only the media circus surrounding the Fed’s intentions, but also that the FOMC may end making the wrong decision to appease its audience.

This kind of strange comment does reflect the Fed officials’ growing frustration with its uneven, inconsistent response to current economic conditions. Are we going to be stuck at near-zero interest rates forever?

Federal Reserve Vice Chair Stanley Fischer, who is more of a policy dove, hedged his bets by reiterating that he thinks there will be a rate hike sometime in 2015, but that this is “an expectation, not a commitment.”

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.