Technical-chart analysts with Barclays look for gold to keep climbing toward the $1,160 level but see chart resistance around $1,190 an ounce. “We expect further short-term gains for gold towards targets in the $1,160 area,” Barclays says, describing this as a Fibonacci level. However, technicians look for “resistance near $1,190 to provide selling interest.” This is around the four-month highs where a rally stalled in October. Spot prices have traded near $1,155 so far Thursday, hitting their strongest level since October, with the U.S. dollar falling to multi-month lows against the euro.

By Allen Sykora of Kitco News; asykora@kitco.com

HSBC: ‘Gold Will Likely Trend Higher’ On Risk Aversion, Lower Treasury Yields

Thursday February 04, 2016 08:05

Growing risk aversion and declining U.S. Treasury yields are supportive for gold, says HSBC. The yellow metal hit a three-month high Wednesday and extended this overnight. “It is growing risk aversion that is supplying the oxygen for gold’s rally. The decline in risk appetite is exemplified by the drop in yields,” HSBC says. “Since the end of December, U.S. government bond yields have been largely on a one-way path lower. Initially this didn’t impact gold but in the last couple of weeks, the dip in yields is lending support to bullion as expectations for Fed rate hikes are reduced. We see no early reversal of this trend and expect gold prices to remain on an upward trajectory.” Further, the strong demand for U.S. Treasury notes is not helping the dollar – “much to gold’s advantage” – with the euro above $1.11 again for the first time since late October, HSBC points out. In the past, analysts note, increased demand for Treasury notes has helped the dollar. “The USD does not appear as attractive this time around, possibly because the Fed is not expected to tighten aggressively or rapidly,” HSBC says. “Gold is therefore the recipient of a greater proportion of risk-off investor interest. We believe this will continue and that gold will likely trend higher.”

By Allen Sykora of Kitco News; asykora@kitco.com

SP Angel: Continued Slide In U.S. Dollar Sends Gold Higher

Thursday February 04, 2016 08:05

SP Angel links the continued climb in gold largely to the continued decline in the U.S. dollar, as the yellow metal typically has an inverse relationship with the greenback. Comex April gold has traded as high as $1,148.50 an ounce, its most muscular level since late October. Meanwhile, the euro has been as high as $1.12024, its strongest level against the dollar since late October. Holdings in exchange-traded funds have staged an “impressive recovery” since the start of the year, rising 4.9% so far, and there has been Chinese demand ahead of the country’s approaching New Year celebrations, SP Angel says. However, the firm adds, “A fresh fall in the U.S. dollar led by a weaker outlook for interest rates in the U.S. is helping gold prices to make strong gains.”

By Allen Sykora of Kitco News; asykora@kitco.com

BNP Paribas: Euro Remains Strong As Fed Expectations Fade Further

Thursday February 04, 2016 08:05

The foreign-exchange market has largely shaken off comments by European Central Bank President Mario Draghi, with the euro continuing to rise against the dollar on diminished U.S. rate-hike expectations, says BNP Paribas. However, the bank adds, this also means a risk for more upside in the U.S. currency if fresh data – such as Friday’s jobs report – pave the way for another Fed hike after all. Draghi Thursday reiterated the downside risks to delaying policy action, thereby signaling that the ECB may deliver further easing measures in March. “Despite this, EURUSD has risen above $1.1150, as risk sentiment appears to deteriorate further and markets continue to scale back expectations for (U.S.) rate hikes in 2016, with less than one full rate hike now priced for 2016,” BNP Paribas says. A catalyst was comments from New York Fed President William acknowledging tightening of financial conditions and noting that the Fed would take this into account when deciding whether to tighten further in March. “While he did not foreclose the possibility of a March hike, markets viewed the comments as validating recent price action in rates markets,” BNP Paribas says. “We expect below-consensus headline non-farm payrolls gains Friday but a new low on unemployment and 0.3% average earnings growth. Risks to Fed pricing now are skewed to the upside and pricing could recover quickly if data meets relatively modest thresholds and the risk environment stabilizes.” As of 8:01 a.m. EDT, the euro was trading at $1.12000, up from $1.11034 late Wednesday.

By Allen Sykora of Kitco News; asykora@kitco.com