Gold posts second loss in a row, but analysts see higher prices ahead

Copper, palladium futures finish higher


Gold futures posted a second straight session decline on Monday, in part as a leading dollar index gained, though bullish analysts considered the metal’s action to be only a pause in its recent uptrend.

“Higher Chinese demand for gold and silver have been factored in by the markets,” said Chintan Karnani, chief market analyst at Insignia Consultants, but Chinese consumer buying will still “be closely watched” with the Lunar New Year celebration this week, a holiday that boosts gold purchases for gift giving.

“Gold prices are not dictated by Chinese demand only,” Karnani said. “Central bank buying and host of noneconomic factors like developments in Venezuela, Brexit among others are supporting gold prices.”

Karnani said he’s bullish on bullion and advises traders to “use sharp corrections to invest in gold.”

April gold GCJ9, -0.21% fell $2.80, or 0.2%, to settle at $1,319.30 an ounce. Prices based on the most-active contracts, however, rose 1.9% last week. The ICE U.S. Dollar Index DXY, +0.19%  was up 0.3% Monday, making commodities priced in the greenback less attractive to users of other currencies. And major stock indexes traded higher as gold futures settled.

Gold futures tallied a second weekly climb in a row through last Friday after the Federal Reserve hinted at a pause in interest-rate hikes. U.S. employment data reinforced a picture of a solid labor market, but one that isn’t likely to sway the Fed from its newfound “patient” policy stance, a development that helped to hand gold a solid 3% January gain, its fourth straight monthly advance.

Richard Perry, analyst at Hantec Markets, said gold’s push north through a key resistance area between $1,300 and $1,310 marked an important technical breakthrough.

“This pivot now becomes a basis of support as the recovery is now on course for a test of the 2018 highs around $1,365,” he said in a note.

And behind that move?

“There is a seasonal factor to consider, with Chinese Golden Week (starting this week) typically increasing physical demand, whilst according to the World Gold Council central banks are busy buying gold, increasing their gold reserves by 651 [metric tons] in 2018, which is the biggest since 1971,” Perry said. “This year, we are seeing the development of a global cyclical downturn (which is gold positive), whilst the Fed has just pushed the pause button on its tightening cycle, citing concerns over a slowdown in China and eurozone, and even Brexit.”

Meanwhile, March silver SIH9, -0.61%  fell 4.5 cents, or 0.3%, to $15.886 an ounce after a gain of 1.5% last week. March copper HGH9, +0.64%  rose 0.8% to $2.795 a pound. April platinum PLJ9, -0.89%  fell 0.5% to $822.80 an ounce. March palladium PAH9, +0.79%  settled at $1,330.40 an ounce, up 1.3%.

The gold-backed SPDR Gold Shares exchange-traded fund GLD, -0.24%  was down 0.3% and the iShares Silver Trust SLV, -0.69%  edged down by 0.2%. The VanEck Vectors Gold Miners GDX, -0.13%  shed 0.6%.

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