Gold futures on the COMEX division of the New York Mercantile Exchange fell Friday as traders took profits after a week of much stronger gold prices due to economic instability.
- Gold dips for second day as stocks gain; China return eyed
- The precious metal was put under pressure as profit-takers sold their gold positions ahead of the weekend. Analysts noted that the price of gold has skyrocketed in recent days due to falling U.S. equities. On Friday, the U.S. Dow Jones Industrial Average rose by 1.82 percent, recovering some of the losses from earlier in the week.
Gold was put under further pressure as a report issued by the U.S. Department of Commerce Friday showed retail sales gained 0.2 percent during the month of January
- Although gold prices may see some selling pressure at the start of the shorter trading week, analysts explain that improving market sentiment and continued uncertainty in global markets will bode well for prices in the near-term.
April Comex gold futures ended their fourth consecutive week in positive territory, settling Friday’s session at $1,239.40 an ounce, up almost 5.7%. This was gold’s biggest percentage gain since late October 2011.
Analysts have noted that the yellow metal’s push back above $1,200 an ounce, generated a lot of attention and positive sentiment among fearful investors looking for a safe-haven. Strong positive sentiment is confirmed in Kitco’s weekly survey, which continues to attract record participation.
This week, the online survey brought in 1,953 votes, of which 1,678 participants, or 86%, said they are bullish on gold next week. This is the second week the survey has hit that level and is the fourth straight week it has been above 80%. At the same time, 177 people, or 9%, said they are bearish on gold next week and 98 people, or 5%, are neutral.
“Gold is likely overbought now but that is normal for the start of a bull market. We have turned the corner and the price action confirms that we are at the start of a new bull market,” Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the In Gold We Trust report, said.
Analysts also cited gold’s run to its one-year high at $1,263.90 an ounce, breaking significant resistance points, which is a strong bullish indicator. Bill Baruch, senior commodity broker at iiTrader, said the weekly close above $1,230 an ounce is an indication that that market is holding on to most of its momentum.
Phillip Streible, senior market analyst for RJO Futures, said that he remains bullish on gold as prices remain above $1,230 an ounce, a level that he said is an important pivot point, representing a 50% retracement from Thursday’s considerable rally.
“We could see some profit taking early in the week but the gold engines will only rev up again. The problems we have seen that sparked this rally can’t be fixed overnight,” he said.
Bill Baruch, senior commodity broker at iiTrader, agreed that $1,230 will be an important support level to watch; however, he added that he is still a buyer of gold as prices remain above $1,200 an ounce.
- The SPDR Gold Trust (GLD) gained 17% year-to-date through February 11 thanks to rising concerns about the economy, softening expectations for the Fed, risky asset volatility and the NIRP fallacy.
The situation is changing now, so I'm recommending investors take profits in the SPDR Gold Trust and other gold relative long securities.
The prospect of Fed Negative Interest Rate Policy (NIRP) has been overdone by media and markets this week, and drove excessive appreciation in gold. It will be dispelled and undone.
Concerns about the U.S. economy have been overdone, and balance should be restored as fresh data is reported, starting with the most recent employment and retail sales data.
The dollar should recover some of its recently lost ground as expectations about the Fed are balanced and fears about the next action of the ECB are intensified.
Reference: Kitco, Xinhua, Seeking Alpha
Thai
Eng