Analysts forecast the Gold 1 OZ (XAU=X) to hit $1900 an ounce in weeks
Gold futures rallied for the fifth consecutive day, surging above $1,700 an ounce to the highest since 2012, underpinned by ample liquidity in the wake of massive economic stimulus packages initiated worldwide to contain coronavirus epidemic as precious metals analysts forecast the yellow metal to hit $1900 an ounce in weeks.
On Tuesday, as investors weighed the economic fallout from the pandemic and the prospect of more stimuli, gold widened the spread over spot prices. Futures rallied as much as 2.9 per cent to $1,742.60 an ounce on the Comex, rising to a seven-year high and traded at $1,714.70 at 6:22am in London.
Spot gold was 0.1 per cent lower at $1,659.53 an ounce, putting the spread between London and New York prices at more than $50. Earlier, the difference topped $60.
That widening gap between gold futures and spot prices echoes a pattern seen last month, when there were concerns about a shortage of physical bullion for delivery against contracts in New York because of virus-driven disruptions.
Gary Wagner, analyst at Kitco, said a possible explanation for this spread that is widening is the expectation that the coronavirus in the United States will get worse before it gets better.”On a technical basis gold has formed an inverse head and shoulders formation with Tuesday’s move in gold futures breaking strongly above the shoulders indicating higher pricing ahead. The rally in gold futures could move as high as $1800 in the next two weeks.”
Analysts at Citibank forecast the yellow metal at $1700 an ounce in a 1-3 month horizon and at $1900 in six to 12 months.
The precious metal is in demand, with JPMorgan Chase & Co.’s Jamie Dimon saying the pandemic will lead to a severe downturn. Its jump came even as risk assets including equities posted gains on signs the outbreak is leveling off.
“The recessionary fallout of the Covid-19 outbreak on the global economy suggests investors are likely to continue to seek refuge in gold,” said BNP Paribas commodities economist Harry Tchilinguirian and head of macro quantitative and derivatives strategy Michael Sneyd.
Also, the massive quantitative easing by global central banks and the unprecedented fiscal stimulus boost the incentive to hold gold, analysts said.
“With the Federal Reserve moving its policy rate to the lower bound and turning to unlimited quantitative easing, and other banks taking similar action, we expect real rates to remain in negative territory as nominal yields are suppressed. This raises the incentive to hold gold, particularly in such an uncertain economic environment,” they said.
Two significant elements capping gold’s gains going forward will be the dollar and more margin-call selling as people flock to cash during the coronavirus panic.
“Diverging activity in physical gold is disrupting the spot market,” Michael McCarthy, chief market strategist at CMC Markets Asia Pacific, said. “Huge US demand for physical contrasts with European selling. This is particularly impacting futures contracts that are deliverable, and is the cause of recent widening of bid/offer spreads in spot gold.”
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 1,569.30.
The projected upper bound is: 1,733.63.
The projected lower bound is: 1,580.14.
The projected closing price is: 1,656.88.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 85.7075. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 5 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 59.48. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 12 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 112.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 12 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 9 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed down -6.605 at 1,655.097. Volume was 8,900% above average (trending) and Bollinger Bands were 111% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,618.90 1,595.43 1,516.22
Volatility: 28 31 20
Volume: 4,931 986 247
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 9.2% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 1 periods.