The price of gold reversed an early dip to over one-week lows and now being traded with modest gains, just below the level of 1,225 USD per ounce, around the top end of its daily trading range. The precious metal stalled overnight, triggered by resurgent US Dollar demand and a strong positive move across global equity markets, and once again, managed to find decent support near 1,220 USD horizontal zone.
The investors awaited clues on the pace of future US interest rate hikes and as the US-China trade spat sours ahead of a G20 summit.
Gold prices have lost over 10% from their April peak as investors turned to the dollar as a safe haven with the trade war unfolding against a backdrop of higher US interest rates.
The red session in Europe and the prevalent negative mood around equity markets, which tend to underpin demand for traditional safe-haven assets, extended some support to the commodity and helped recover early lost ground to the lowest level since November 19. It, however, remains to be seen if the commodity is able to build on the positive momentum or continues to meet with some fresh supply at higher levels as investors wait for fresh cues about the Fed’s near-term monetary policy outlook.
The precious metal has been a little quite over the past week and a half or so. Last week’s entire range was under 12 USD, as it traded between 1,218 and 1,230 USD. Gold is yet to break outside of this range so far this week. After a positive start yesterday, the metal ended lower as the dollar rose again while yields rebounded. It has started today’s session on the front foot again, but let’s see how it will behave later when US traders come to their desks. This morning’s rebound was partially driven on hopes for a rebound in demand from China.
The holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.15% to 761.74 tonnes on Monday.
Meanwhile, hedge funds and money managers cut their net short positions in Comex gold and silver contracts in the week to November 20, the US Commodity Futures Trading Commission (CFTC) said on Monday.
Gold technical analysis
Gold is treading water right at the April trend-line, and with it not turning lower it increases the likelihood that it will trade higher. If it does, though, it won’t be long before another zone of resistance surrounding 1,240 USD will come into play. Broadly speaking, even a breakout above all near-term resistance will still keep the precious metal in the confines of a developing bear-flag. However, it won’t be validated until the trend-line off the August low is broken.
Any subsequent up-move might continue to confront some fresh supply near the region 1,228-1,230 USD per ounce, above which the momentum could further get extended towards 1,234 USD horizontal zone en-route the 1,240 USD resistance.
On the flip side, the 1,220 USD region might continue to protect the immediate downside, which if broken is likely to accelerate the fall towards 1,213-1,212 USD intermediate support before the metal eventually drops to the 1,208-1,207 USD region.
Gold and Silver demand
The analysts expect increasing demand for gold and silver in 2019, as a safe haven. The uncertainty in European politics and US-China trade war, definitely pose risks for the global economy and may increase the demand for the precious metal.
Central banks have become net buyers of gold recently, especially with regard to China, India, Russia and Turkey, the gold demand is really going through the roof. If that continues and if other countries hop on the bandwagon, then those central banks could become very active in the market.
Gold demand in India, the second biggest gold consumer after China, usually picks up towards the end of the year going into the wedding and festival season. Traders expect the recent fall in domestic gold prices to perk up demand.
Gold and Silver price forecast
Gold prices could push back to 1,350 USD per ounce in 2019 as the US economy peaks and the dollar faces headwinds. For 2019, the analysts see gold prices averaging the year at 1,275 USD per ounce, up more than 4% from current prices. December gold futures last traded at 1,222.70 USD per ounce, relatively unchanged on the day.
The rising financial volatility and a weaker US dollar will also continue to support gold prices. Moreover, the stimulus effects of the 2018 tax cuts start to fade next year, which definitely will affect the equity markets and will hardly maintain their current valuations.
While analysts are optimistic for the price of gold, they are even more bullish on silver seeing an average price of 16 USD per ounce next year and pushing as high as 18 USD per ounce. The 2019 average forecast for silver represents a gain of 12.5% from current prices.
Although gold and silver have been largely disconnected in 2018, as the gold-silver ratio has pushed to its highest level since 1993, the shifting fortunes in commodity markets will benefit both precious metals. While silver is more volatile then gold it stands to benefit more.