Gold To Reverse Trend if Lower Prices Attract Buyers

Gold rose from a five-week low in New York, narrowing a second weekly loss, on speculation prices near a technical level will discourage selling.

Bullion fell as much as 1.3 percent to $1,289.40 an ounce yesterday, the lowest since June 19, as U.S. equities reached a record after data showed jobless claims fell and global manufacturing increased. The metal, which yesterday fell near its 200-day moving average, slid 28 percent last year on expectations the Federal Reserve would tighten monetary policy.

U.S. interest rates may rise sooner than forecast “if the labor market continues to improve more quickly than anticipated,” Fed Chair Janet Yellen said last week, adding the central bank must press on with stimulus because “significant slack” remains. Gold is heading for a monthly loss even amid unrest in Ukraine and the Middle East.

Gold’s decline to near the 200-day moving average “has so far been enough to halt the slide, as short-sellers have used that support to book some profit,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said today by e-mail. “Considering the improvement in recent data and speculation about the Fed’s intentions with regard to tightening, the market will be nervous over the coming week, leaving little room to the upside.”

Gold for December delivery rose 0.4 percent to $1,297.40 by 7:30 a.m. on the Comex in New York. Prices declined 1 percent this week. Bullion for immediate delivery was little changed at $1,295.62 in London, according to Bloomberg generic pricing.

Futures trading volume was 19 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg show. Prices fell below the 100- and 50-day moving averages this week. The 200-day measure is at about $1,287.20.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza