Tuesday, 17 October 2017
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Don't Get Too Excited About Gold's Bounce; Interest Rates Are Going Higher
Tuesday, 10 October 2017 04:17 WIB | GOLD CORNER |Gold OutlookGold Corner

While bargain hunters are stepping in to push gold prices off Friday's two-month low, some analysts are warning traders and investors to use some caution at current levels.

Lukman Otunuga, research analyst at FXTM, said that short-term bulls appear to be exploiting renewed geopolitical uncertainty as rhetoric between North Korea and U.S. President Donald Trump continue to heat up. However, he warned that upside potential for the yellow metal could be limited as the U.S. dollar continues to strengthen on rising potential for a U.S. interest-rate hike in December.

œTechnical traders will be paying very close attention to how prices react above the $1,280 resistance level. A technical bounce seems to be in play, with bears still in firm control below the psychological $1,300 level.  Sustained weakness back below $1,280 should forge a path back towards $1,267, he said in research note Monday.

December gold futures settled at $1,282 30 an ounce, up 0.8% on the day.

Looking at rate expectations, CME 30-day Fed fund futures are pricing in an almost 92% chance of a rate hike by December. Expectations have spiked higher compared to a week ago, when markets were pricing in a 76% chance.

Phillip Streible, senior market analyst at RJO Futures, said that with interest-rate expectations so high, it is difficult to get excited about a one-day bounce in the gold market.

œWe are in a downward-sloping channel and traders should be looking at selling rallies with prices below $1,300, he said.

Not only are rate expectations at their highest levels so far this year, U.S. economic data remain relatively positive, which is supporting equity markets, Streible added.

Streible said that with his current bearish outlook, he expects gold prices to fall to key support at $1,250 an ounce.

 

Source: Kitco News

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