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Gold On a Roll Above $1,300 as Fed Stays

CommoditiesJan 30, 2019 02:42PM ET
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Investing.com - Many market pundits think gold will come off its highs soon and see lackluster moves till the year end. For now, the yellow metal's momentum at the top is telling a different story.

For a fourth day in a row, benchmark February gold futures on New York Mercantile Exchange's Comex division hit highs above the key $1,300-an-ounce level.

The last two session have been particularly remarkable for February gold as it made highs on days when even the dollar, a contrarian trade to gold, rose. On Wednesday, Wall Street stocks, which often pushes gold in the opposite direction, were higher too after a string of strong corporate earnings.

February futures aside, Comex's most-active gold contract for April settled up $3 at $1,315.50 an ounce on Wednesday, after making a session peak at $1,320.80. The rally came ahead of the monthly meeting of the Federal Reserve which kept interest rates unchanged as widely expected.

The spot gold contract, reflective of trades in physical bullion, was by $7.45, or 0.6%, at $1,319.11 by 1:58 PM ET (18:38 GMT), after making an eight-month high at $1,319.91.

Gold futures' gain on the year itself is a modest 2.2%. But almost all of that gain has come from the past four sessions, indicating that the yellow metal may have found the legs to a rally. Gold has struggled since last summer in part because of four Fed rate hikes in the last year.

Walter Pehowich, executive vice-president at Dillon Gage Metals in Addison, Texas, said a number of geopolitical and economic tensions -- from protracted Brexit negotiations in Europe to Venezuela's leadership crisis in South America and inconclusive U.S.-Sino trade talks in Washington -- were keeping gold's uptrend intact.

"Gold ETF (NYSE:GLD) inflows are also increasing, as more and more investors jump in, continuing to diversify their portfolios," Pehowich said.

Many market pundits, however, think that gold will lose its fizzle and be trapped in a range of around $1,300.

A Reuters survey of 36 analysts and traders published on Tuesday showed the median forecast for gold in 2019 only averaging $1,305 -- up just 3% from the 2018 average.

The poll concluded that only in the coming year onward, a price breakout could be expected, with a high of $1,350 forecast for 2020. Even then, that will be below peaks of $1,374.91 seen in 2016 and $1,366.07 hit last year.

Separately, Standard Chartered (LON:STAN) precious metals analyst Suki Cooper told CNBC that she expected gold to average $1,325 by the fourth quarter and attempt to breach $1,400 in 2020. Gold has not hit $1,400 since September 2013.

The spot price of palladium traded at $1,358.55 per ounce, up $15.30, or 1.1%, by 2:33 PM ET (19:33 GMT).

Spot palladium has traded above gold since hitting record highs of $1,440.35 on Jan. 17, making it the world's most valuable traded metal. Gold's all-time peak is, however, even higher in the $1,900 level.

The most-activepalladium futures contract on Comex rose by $16.25, or 1.3%, to $1,319.85 per ounce.

In other precious metals on Comex, silver futures gained 22 cents, or 1.4%, to $16.06 per ounce.

Platinum futures rose by $7.60, or 0.9%, to $823.40 per ounce.

In base metals,copper rose 5.4 cents, or 2%, to $2.78 per lb.

Gold On a Roll Above $1,300 as Fed Stays
 

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