- Gold appears to have put in a near-term bottom with this week's
bounce and that could allow the yellow metal to rise again next
The rally helped to halt a decline the market experienced for
January and early February, market watchers said.
"It looks like we did put a bottom in gold. January and February
are not hot times for gold. Last year, we had a much more severe
setback," said Sterling Smith, commodity trading adviser and market
analyst with Country Hedging.
April gold prices on the Comex division of the New York
Mercantile Exchange settled at $1,349 an ounce, down $4 on the day,
but up 0.5% on the week. March silver settled at $29.059 an ounce,
up 4.1% on the week.
Shawn Hackett, president of Hackett Financial Advisors, said it
was important for gold to hold the 150-day moving average. Gold
prices fell to $1,307.70, as measured on a daily continuation
chart, just above $1,305.50, which is where the average was that
day. "It's remarkable the way it held," he said.
This technical-chart point has proven in the past be to be
important for gold.
"In late July, it tested it and we had a huge rally. In February
it held it and in March we had a big rally. The last time we were
below, it was the big crash," Hackett said, noting in July 2008
gold broke the 150-day moving average for the first time in a long
time and not long afterward fell 35%.
The last time gold prices were under this average was in January
2009. "Until that breaks, the bull is still on," he said.
Hackett added that the unrest in Egypt has given gold new life.
"As long as the Middle East remains unsettled, gold's interim
lows are in place. Gold was going down and was starting to do some
serious technical damage, but now there's a new reason to buy gold.
The Middle East is bullish for gold and Uncle Ben (Bernanke) is
still having a lot of fun," Hackett said, referring to the Federal
Reserve's second quantitative easing program.
Smith said the market will watch if there is any contagion
regarding the political unrest in Egypt, but suggested the bullish
case for gold could be limited if the strife does not spread to any
other countries. "The Egyptian political situation makes people
nervous, but revolutions are not good economically. It takes away a
bit of the inflation argument. I don't see Egypt by itself (as
bullish) but if we see it spreading… that situation could be quite
bullish for gold. The markets would be nervous about crude oil
flow, or God forbid, terrorism," he said.
Smith said next week's U.S. economic calendar is light, so any
market-moving events would likely have to come from overseas. He
did note that China will continue to be closed for its New Year
celebrations, so without Chinese buying, that could put a drag on
He said for next week, resistance for April gold comes in at
$1,370. Barclays Capital technicians said a break above resistance
in the $1,400 area "would confirm our bullish view and prompt a
re-test of the $1,432 all-time high. Our greater targets remain in
the $1,460-$1,485 area," they said.
Smith said the $1,400 area is feasible in the first quarter, but
between the Chinese New Year and the Presidents' Day holiday in
mid-February in the U.S., it might be difficult to reach that area
Silver is beginning to benefit from the all-time highs reached
in the copper market, Smith said, and the technical chart patterns
should support the gray metal. "Silver should have a solid week.
There's resistance at $29.81 to $30. If we break that then we could
test $31," he said.
Barclays said its also looks for silver to break above $30 and
resume gains through the recent high of $31.26.
By Debbie Carlson of Kitco News