Gold prices broke above their key 50-day moving average, marking a very bullish development as the U.S. dollar nose-dived and the major stock indexes cheered Black Friday.
The spot gold price jumped 1.21% to $1,751.70 an ounce.SPDR Gold Shares ( GLD ), tracking a 10th of an ounce of bullion, surged 1.21% to 169.58 in heavy volume. GLD regained its 50-day line for the first time since it broke below it a month ago, confirming that its uptrend remains strong. GLD's chart also appears to be forming a long bullish cup-with-handle chart pattern with a 174.17 buy point.
Because of the low trading volume after the Thanksgiving holiday, Janice Dorn, co-founder of Jtrader.us, feels "skeptical about this move right now." That's unless gold prices can hold above $1,740 to $1,745 an ounce when the markets open on Sunday evening. If so, gold could break above $1,800 an ounce easily next week, she says.
Walter de Wet, an analyst at Standard Bank, expects gold to trade in a range between $1,700 and $1,750 an ounce next week.
"With month-end approaching, and a raft of data due for release during the first week of December, we believe that (market) participants are unlikely to increase risk positions substantially," de Wet wrote in a daily commodities report. "While physical demand for gold has declined from levels seen in the run-up to Diwali (Indian holiday), overall buying remains fairly persistent, although the volumes are smaller."
He sees demand dropping if gold prices rally above $1,750 an ounce.
China is building up its gold stash to diversify its monetary reserves away from the U.S. dollar, Scotiabank wrote in its "Global Economic Research" report released Thursday. Gold imports into Hong Kong totaled 581 tons the first nine months of the year.
"Under Basel III, gold may be re-classified as Tier 1 capital for bank holdings, regaining its status as a fully fledged financial asset," Scotiabank's report stated.