Gold futures rebounded on Monday from their lowest level in more than five years, finding support from weakness in the U.S. dollar to trade near $1,100 an ounce, but analysts said prices haven’t likely hit bottom just yet.
The yellow metal was benefiting from haven demand as stocks mostly retreated world-wide, led by a major selloff in Chinese equities, but technical analysts attributed Monday’s rebound in gold to technical factors.
August gold GCQ5, +0.88% climbed $11.10, or 1%, to $1,096.60 an ounce on Comex, after tapping an intraday high of $1,104.40. Prices were staging a comeback from Friday’s settlement price of $1,085.50, which was the lowest level since February 2010.
Prices got a boost for both technical and fundamental reasons, according to Mike Armbruster, principal and co-founder at Altavest Worldwide Trading.
‘Any gold rally from here is likely to be a rally within the context of a bear market.’
“Technically, gold is bouncing off of longer-term trendline support,” which is roughly at $1,085 — close to Friday’s settlement price, he said. “Technical indicators are in deep oversold territory and conditions are ripe for a short-covering rally.”
But “any gold rally from here is likely to be a rally within the context of a bear market,” said Armbruster. “We think the trend toward lower levels is likely to continue in the months ahead.”
Similarly, Ross Norman, chief executive officer at Sharps Pixley Ltd. in London, said momentum in the gold market is “still with the bears.”
Prices haven't hit bottom yet, he said, and he expects them to “attack the $1,080 level, which is “midway between the all-time high at $1,922 and the 36-year low at $246.”
Still, given overall bearishness for gold, “we may indeed be nearing a bottom—as a contrarian, this represents an excellent buying opportunity,” said Norman.
The price climb Monday came as the U.S. dollar DXY, -0.78% slid against most major currencies, ahead of a closely watched Federal Reserve meeting later in the week that could determine the trading action in currencies and commodities in coming weeks. The U.S. central bank is widely expected to keep interest rates at a record low at the meeting, but expectations are rising that a rate hike could come before New Years. Read MarketWatch’s Fed preview
Those expectations have recently driven the greenback higher, and in turn added pressure on dollar-denominated commodities that get more expensive for other currency holders.
U.S. data released Monday didn’t offer much of an economic hint for the Fed’s next move. They showed that orders for durable goods jumped 3.4% in June, but U.S. business investment rose just modestly.
In other metals price action, platinum for October delivery PLV5, +0.58% picked up $2.20, or 0.2%, to $982.90 an ounce, while September palladium PAU5, -1.32% added 15 cents $622.75 an ounce.
September copper HGU5, -1.32% slipped by 2.2 cents, or 0.9%, to $2.361 a pound.
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