Darren Kugler
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Gold settles at a 5-week high above $1,150

Analyst: gold could rally to $1,190 before hitting resistance

Gold futures saw their highest settlement in five weeks on Thursday, getting a lift from dovish Federal Reserve minutes as well as sharp stock-market declines in the U.S. and abroad that increased its haven appeal.

Gold for December delivery GCZ5, -0.23% jumped $25.30, or 2.2%, to settle at $1,153.20 an ounce on Comex, adding to the $11 gain it scored on Wednesday. That was the highest settlement for a most-active contract since July 14.

“Gold appears to have put in an intermediate bottom,” said Mike Armbruster, principal and co-founder at Altavest Worldwide Trading.

“Long-term fundamentals remain bullish with easy monetary policy everywhere you look,” he said, and “China’s yuan devaluation also coincides with gold’s recent low.”

But the metal “has more work to do on the upside before conclusions can be drawn on whether or not gold has put in a longer-term bottom,” said Armbruster. “Short-term, we think gold could rally to $1,190 before hitting much resistance. If gold can move decisively through $1,200, then gold starts to look much more interesting.”

Thursday’s move came on the back of Wednesday’s release of minutes from the Federal Open Market Committee’s latest meeting, which showed some policy makers felt inflation was still too low to justify an interest-rate hike. This dovish assessment hampered the dollar, which erased all of its gains from the last three sessions after the release of the minutes, which came out after gold prices settled for the Wednesday session.

Commodities have been pressured by rate-hike expectations, as higher interest rates increase the cost of storing commodities, making them less attractive to investors.

“Expectations are now that the Fed won’t hike in September,” said Erik Gebhard, co-founder of Altavest Worldwide Trading. But rallies in the price of gold that breach the 100-day moving average of $1,170 and head towards the $1,200 level “would be a good selling opportunity.”

Naeem Aslam, chief market analyst at AvaTrade, said that a September rate hike is still “very much on the table” and the next indicator the Fed will look to will be the U.S. non-farm payroll data due next month.

U.S. economic data Thursday showed weekly jobless claims rose for a fourth straight week while the Philadelphia Fed’s index of business conditions rose more than expected. Home sales were stronger than expected, but the leading U.S. economic index fell 0.2% in July.

In other metals trading on Thursday, high-grade copper for September deliveryHGU5, -1.29% tacked on 4.4 cents, or 1.9%, to $2.312 a pound, rebounding from the lowest level in more than six years. Palladium for the same monthPAU5, -2.69% added $13.50, or 2.2%, to $623.25 an ounce, while October platinum PLV5, -1.25% gained $21.80, or 2.2%, to $1,034.90 an ounce.

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