Gold prices hit a 7-month high on Tuesday as investors turned to safe havens on worries over escalation in Sino-US trade tensions after the US Justice Department charged China’s Huawei Technologies with fraud.
Spot gold rose to its highest since June 14, 2018, at 1,306.43 USD per ounce and was up by 0.2% at 1,306.11 USD per ounce. The US gold futures were up 0.1% at 1,304.70 USD per ounce.
However, according to the analysts, the bull market has not really begun, as the uptrend is mostly because of turning investors assets in a safe haven. Once the gold price starts getting above 1,300-1,400 USD on the upside, that’s where the price trend will really start to establish itself.
For the first quarter of the year, the gold price is expected to pullback to around 1,250-1,240 USD. But, going into the second and third quarters, the buyers will return and the bullish sentiment may return.
The gold tends to rise on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion. The precious metal has risen by over 12% since touching a more than 1-1/2-year-low in August due to volatile stock markets and a softer dollar on the back of expectations that the Fed will pause its multi-year rate-hike cycle.
The Fed’s December forecast said it expected to make 2 or more hikes to interest rates in 2019. Betting on the futures market, however, sees just a 3.0% of that happening, but the probability of 1 hike has doubled to almost 1-in-4 from the market’s expectations this time last month.
Reflecting investor sentiment in bullion, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), rose by 0.73% to 815.64 tonnes on Monday, which is the highest level since June 2018.
Meanwhile, the palladium was steady at 1,331 USD per ounce after prices hit a record high of 1,434.50 USD on January 17. The price of the silver rose by 0.2% to 15.77 USD per ounce while platinum was up by 0.4% to 812.51 USD.
Gold price technical analysis
During the trading yesterday, gold rose from 1,302.76 USD to 1,303.10 USD per ounce. This morning it traded at levels 1,303.54 USD.
The yellow metal benefits as traders remain cautious ahead of key events: Brexit vote in the UK; Fed’s policy decision; end of the latest US-China talks as well as the earnings reports of the big tech companies.
If today the gold overcomes the resistance range of 1,305.72-1,306.45 USD, it will move up, testing the zone 1,308.33-1,308.70 USD. Upon success, the upward trend will continue to 1,312.41-1,313.14 USD.
If the gold falls below the support zone 1,299.76-1,299.03 USD, then the next support will be the zone 1295.32 – 1294.95 USD. In the event of a breakthrough, the downward trend will continue to 1,293.07-1,292.34 USD.
Former high at 1,298 USD (January 4) marks initial support, with more significant support provided parallel-running converged 10/20SMA’s (1,290-1,289 USD) expected to contain deeper corrective actions.
Silver price technical analysis
During trading yesterday, silver was in range 15.578-15.783 USD per ounce. This morning it traded at 15.70 USD.
If today the silver overcomes the resistance range of 15.81-15.82 USD, it will target reaching and testing the zone 15.90-15.91 USD. Upon success, the upward movement will continue to 16.01-16.02 USD.
If today the silver falls below the support area of 15.61-15.60 USD, the next support will be the zone 15.49-15.48 USD. In case of a breakthrough, the downward trend will continue at 15.41-15.40 USD.