By Barani Krishnan
Investing.com -- Gold bugs are having their biggest week in 30 months as their two biggest tormentors — the dollar and cryptos — were vanquished this week.
U.S. gold futures’ benchmark December contract finished Friday’s trading up $15.70, or almost 1%, at $1,769.40 per ounce on New York’s Comex. More importantly, it rose $92.80, or 5.5% on the week — its most since a 6.5% jump during the week to April 3, 2020.
The spot price of bullion, which is more closely followed than futures by some traders, was at $1,766.59 an ounce by 14:45 ET in New York (19:45 GMT).
Gold has rocketed since Thursday as U.S. inflation registered its slowest annual reading in nine months, heightening speculation that the Federal Reserve will back off from the aggressive rate hikes it has executed since March, sending the dollar crashing.
The Dollar Index, which pits the greenback against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, was down 4.1% on the week, its most since a 4.8% weekly drop in March 2020.
Cryptocurrencies, meanwhile, are in a crisis of their own after industry leader Bitcoin fell over 20% on the week as crypto-exchange FTX headed for bankruptcy.
Gold is probably winning at least some of the money that had exited cryptocurrencies this week, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
“There’s no hard data to corroborate fund flows from crypto into gold now but I’d be surprised if that isn’t happening,” Streible said. “Normally, it’s the other way round as gold seldom finds love from the crypto crowd. But gold looks relatively safer now than digital currencies and imagine it has gained new respect that could mean higher allocations that may have been meant for crypto.”
Craig Erlam, analyst at online trading platform OANDA, joins a legion of analysts around the world who expect gold to get to $1,800 at least after clearing resistance at between $1,770 and $1,780.
“Gold bulls have been waiting for this week for a long time: a week (or so) in which the Fed signaled a potential slowing of rate hikes and the CPI data displayed a significant and broad-based decline,” Erlam said.
The CPI, or Consumer Price Index, registered in October its slowest annual growth in nine months, expanding just 7.7% over a 12-month period, versus a growth of 8% forecast by economists and against the previous yearly growth of 8.2% to September.
“There’s been an explosion in gold buying over the past 24 hours and we now seem to be approaching the 50-week Exponential Moving Average of $1,771,” SKCharting.com’s chief technical strategist Sunil Kumar Dixit said, noting that Comex gold for December virtually breached with Friday’s session high of $1,770.95.
At above the 50-week EMA of $1,771, the next leg higher for gold sits at $1,796-$1,805, Dixit said.
But he also cautioned that the yellow metal could still lose its upward mojo and turn lower suddenly — as it has done in the past.
“Overbought conditions on the Daily Stochastics may cause profit-booking from the key resistance zone of $1,796-$1,805, triggering correction to the support areas of $1,730 - $1,710 - $1, 693 - $1,680.”