Gold futures rose on Monday, as weakness in the dollar and superlow government bond yields helped to keep the precious metal trading in a range that some market experts see as forming a bullish pattern.
Jim Wyckoff, senior analyst at Kitco.com, said that he believes that gold may be set to “break” higher despite gains in equities that have suggested that risk appetite on Wall Street is improving, a scenario that would usually deflate appetite for haven metals like gold.
“Importantly, recent sideways and choppy price action in gold has produced a bullish coiling pattern on the daily bar chart, suggesting the market is storing up energy for a bigger price move coming soon (possibly this week), and odds favor that price move being on the upside,” Wyckoff wrote.
Equity markets have drawn some optimism from hope of a vaccine for COVID-19, a bearish factor for bullion, but anticipation about coming volatility from U.S. presidential election in November also has buttressed gold buying.
December gold GCZ20, +1.04% GC00, +1.04% rose $10, or 0.5%, at $1,957.90 an ounce, following a 0.7% weekly gain for the yellow metal.
Meanwhile, December silver SIZ20, +1.81% SI00, +1.81% added 30 cents, or 1.1%, at $27.150 an ounce after gold’s sister asset climbed by 0.5% last week.
The gains for the precious metal also follow weakness in the U.S. dollar, which was off 0.3% early Monday, as gauged by the ICE U.S. Dollar Index DXY, -0.45%, a measure of the buck against a half-dozen currencies. The 10-year Treasury note yield TMUBMUSD10Y, 0.658% also was hanging below 0.70%.
Lower yields for government debt make gold a more compelling option for investors comparing investing in metals against Treasurys and a weaker dollar can make buck-pegged assets more attractive to overseas buyers.
On the more cautious front, Craig Erlam, senior market analyst at Oanda in a Monday note, said that although he believes the long-term bullish case for gold remains intact, there is a possibility of a corrective move for gold.
“This temporary setback for the dollar — and reprieve for gold — may not last though with a corrective move in both cases still looking plausible in the near future,” Erlam said.
Looking ahead, investors will be watching for a fresh policy update from the Federal Reserve at the conclusion of its two-day policy meeting which starts Tuesday. Further signals that the central bank will keep rates lower for longer will add fuel to the bullish thesis for gold and silver, experts say.
