GOLD futures this week made a new high not seen since 2012, but have come off on profit-taking towards the end of the week as the US dollar gained strength, and on expectations that the US may soon ease lockdowns for some American states.
The benchmark Comex June Futures contract hit a US$1,788.8/ounce high on Tuesday and then eased. Futures were at highs last seen in 2012.
The Comex contracts rallied at the start of the week on safe-haven buying and the uncertainty of the re-opening of the US economy as the number of coronavirus infections showed no signs of slowing. The Comex contract hit a high of US$1,772.8 on Monday before settling at US$1,761.4.
The benchmark Comex Gold June Futures on Tuesday settled higher for a fourth trading session, as the US dollar weakened and safe-haven buying continued. The June contract made the highest settlement of US$1,768.9 since 2012 for a Comex active contract, after establishing a contract high of US$1,788.8.
But as the dollar regained strength from its recent weakness, it ignited profit taking in gold. The dollar index on Wednesday rose to a four-session high and put downward pressure on gold prices.
Gold has surged since the previous Thursday, after the US Fed announced an additional US$2.3 trillion stimulus programme, as US filings for unemployment benefits hit a new high. But the gold market took its cue from the renewed strength of the US dollar and expectations that US lockdowns would ease, so gold ended the week softer.
Technical analysis
Daily technical indicators are still positive, but its trajectories have been showing signs of turning lower. The 14-day RSI is likely to close the week at its lowest level, suggesting that a consolidation or retraction is due. But the bullish trend is intact and supported fundamentally. Immediate resistance for the June Comex 100 oz contract is at US$1,788, followed by US$1,800; support is at US$1,692, followed by US$1,670.
Weekly market assessment
It is now difficult to have an accurate opinion as to what would happen next in the gold market, but most would agree it depends on whether lockdowns are eased. I would expect governors of US states to err on the side of caution and not implement any easing measures next week. The fundamentals still support gold as a safe-haven asset.
But officials from the European Central Bank have been saying that they are prepared to increase the size of the asset-purchase programme and adjust their composition by as much as, and for as long as needed, to support the European economy through this shock. So any easing by central banks would be supportive of the gold market.
- Avtar Sandu is senior manager, commodities at Phillip Futures
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