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June 13, 2024
PI Global Investments
Precious Metals

Gold market holds the line at $2,050, waiting for another catalyst

(Kitco News) – The gold market continues to hold the line at critical resistance at $2,050 an ounce, but according to some analysts, the precious metal needs a new catalyst or at least further insight into the Federal Reserve’s monetary policy trajectory to break out of its current range.

Gold is seeing a relatively quiet start to the week as U.S. Markets are closed in recognition of Martin Luther King Jr. Day. In the international spot market, gold last traded at $2,053.70 an ounce, up 0.24% on the day. At the same time, spot silver last traded at $23.20 an ounce, roughly unchanged on the day

The gold market is not seeing much direction from the greenback as the U.S. dollar index trades listlessly during the holiday. The index last traded at 102.63 points, up 0.20% on the day.  

Although gold has managed to start the new year above $2,000 an ounce, analysts said the market could continue to consolidate as it waits for further guidance regarding the Federal Reserve’s monetary policy. Markets continue to price in aggressive rate cuts this year, with the easing cycle projected to start in March, even as central bankers have pushed back on this idea.

According to some analysts, Wednesday’s retail sales numbers could create some volatility for gold this week.

“A weak U.S. retail sales could offer renewed life for gold bulls and see price target 2075,” said Chris Weston, Head of Research at Pepperstone, in a note Monday.

David Morrison, Senior Market Analyst at Trade Nation, said that while gold continues to hold its ground, more work is needed to attract new investors to the marketplace.

“There’s a decent stretch of clear water between the current gold price and major support around $2,000-2,010. But the bulls really need to see gold break and hold above $2,100 to significantly increase the probability of more significant rally,” he said in a note Monday.

Ole Hansen, head of commodity strategy at Saxo Bank, noted that if gold prices get above $2,060, market momentum could drive it to $2,088 an ounce.

Investors have been reluctant to enter the gold market as the Federal Reserve maintains its restrictive monetary policy. Some analysts have said that the gold markets will need to see an actual rate cut before investors move off the sidelines and back into the market en masse.

Lackluster investor demand remains a critical theme in gold-back exchange-traded funds, which fell to a four-year low last week.

Although gold is caught in neutral, analysts are not expecting to see any sharp decline in the precious metal as safe-haven demand continues to provide critical support.

Gold regained the $2,050 level on Friday in part because of escalating tensions in the Middle East after the U.S. and UK militaries bombed Houthi militants in Yemen, with the U.S. continuing its bombardment through the weekend.

On Monday, a U.S.-owned ship was hit by a missile fired from Yemen, according to U.S. Central Command.

“On Jan. 15 at approximately 4 p.m. (Sanaa time), Iranian-backed Houthi militants fired an anti-ship ballistic missile from Houthi-controlled areas of Yemen and struck the M/V Gibraltar Eagle, a Marshall Islands-flagged, U.S.-owned and operated container ship,” U.S. Central Command said in a post on X.

There were no injuries or significant damage reported, and the vessel continued its journey.

Analysts have said that any further escalation in the Middle East could drive safe-haven demand for gold and push prices back to $2,100 an ounce.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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