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(kitco news) – The gold market remains close to a key long-term resistance point and there is no clear catalyst behind this new rally, according to one market analyst.
Nicky Shields, head of metals strategy at MKS PAMP, said in a note on Tuesday that if gold’s technical momentum continues at its current pace, prices could reach all-time highs within 10 days. Ta. December gold futures prices rose 0.21% to trade at $2,044.20 per ounce at the start of new trading.
“Since the $1,930 low, gold has risen at a rate of +$8 per day ($88 in 11 days at the time of writing). If the current pace continues, the price will reach $2,100 within 10 days. Deaf,” she said. That seems like it will happen soon, but markets have proven to trend until they do, and the path of least resistance is up, not down. ”
Shields noted that gold’s rally comes as demand for geopolitically safe assets begins to wane, and there is no clear bullish story in the market.
However, he noted that a weaker US dollar and a sharp drop in US Treasury yields are pushing gold prices to six-month highs. Analysts say the dollar is losing momentum as investors expect the US Federal Reserve to start cutting interest rates in the first half of next year.
“Gold is a pre-emptive tool to sniff out a Fed rate cut cycle,” Shields said. “Coupled with a very defensive US dollar and good tailwinds from lower real yields, there is no reason for prices to sell.”
One trend highlighted by Mr. Shields is that more activity is occurring during Asian trading hours. He noted that the price increase could be the result of aggressive buyers testing a thin market. However, he added, this could be a new buying trend by large buyers such as emerging market central banks and wealth funds. Previous data shows that central banks have been quick to take advantage of falling prices.
“It is worth noting that [these participants] The last two years we were taking advantage of the decline ($1,600, then $1,800, then $1,900), but now it’s coming to market faster,” she said. “If this is a sign that central banks are seeking security amid (geopolitical) turmoil, a more unstable world order, and an anticipated reset of financial “tectonic shifts,” CB activity We will need to change our view from being supportive to bullish. . It’s still too early to tell, as we’ll have to see the data and there were countless bull traps at $2,000. ”
Regarding the current level of sustainable gold prices, Shields said Western investors are still reluctant to jump in and there is room for prices to rise as this part of the market starts to take note of price trends. He pointed out that there is.
“Investors have only bought 2.3 million ounces over the past 10 days, most of it from new COT longs, with a fair amount of wing options execution,” he said. “There are no price overruns (as volume indicates) and buying, while somewhat aggressive, is being done with a wall of producer-related and scrap activity in mind. Gold Forward has shown nothing suspicious. Hmm. We generally have a constructive calm (low volume) rally as there is room for FOMO to participate to extend the rally to a state where liquidity is thin (will get closer to ATH…) There is.”
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