Gold Price Ending Fifth Month Lower, Longest Losing Streak Since '13
(Kitco News)- Gold prices areholding critical support above $1,200 an ounce, but according to some analysts,there is still much heavy lifting that needs to be done as the precious metalsees its longest monthly losing streak in five years.
August was aparticularly rough month for the yellow metal as the price dropped to a 1.5year low at the beginning of the month. While prices are off its lows, themarket is still in a significant downtrend with Comex December gold futures last trading at $1,210 an ounce, down around 2% since the end of July. The goldmarket is seeing its worst losing streak since 2013 as the price is down 10% in the last five months.
Analysts have notedthat the gold market remains at the mercy of the U.S. dollar. The U.S. DollarIndex continues to trade near a one-year high, testing critical resistance justbelow 95 points. Until sentiment in the U.S. dollar changes, analysts say thatthe yellow metal will continue to struggle.
“With the Dollarsupported by the bullish sentiment towards the U.S. economy and expectationsheightened over higher interest rates, the outlook for Gold remains tilted tothe downside,” said Lukman Otunuga, research analyst at FXTM.
Justin McQueen, marketanalyst at DailyFx.com, warned in a report Friday that rising global tradetensions could continue to support the U.S. dollar. In an interview withBloomberg, President Donald Trump said that he wants to impose an additional$200 billion in tariffs on imported Chinese goods.
Analysts have notedthat the U.S. dollar has benefited from recent trade war rhetoric becauseinvestors think that strong economic growth will help the U.S. weather anypotential economic storm.
“Consequently, USDbuying could prevail over demand for gold, which puts the psychological$1,200/oz level at risk of a break,” said McQueen. “Trade war concerns are backat the forefront of investors’ minds, spelling bad news for gold bulls.”
McQueen added thatoutflows in the world’s largest gold-backed Exchange-Traded Fund SPDR GoldShares (NYSE: GLD) are an indication that the recent rally in the preciousmetal is fragile at best.
Data compiled by theETF shows that gold held in trust dropped by 42.39 tonnes in August. The latestdata showed GLD holding totaling 757.81 tonnes.
“The drop off in goldETF holdings poses a risk that gold could be heading lower once again,’ saidMcQueen.”
While gold is stillstuck in a sharp downtrend, optimism is growing among some analyst andinvestors as they extreme negative sentiment in the marketplace asunsustainable.
Ina recent interview with Kitco News, Ole Hansen, head of commodity strategy atSaxo Bank said that there is a $40 to $50 rally somewhere in the gold market;however, he added that it will take a material reversal in the U.S. dollar tospark the rally.
By Neils ChristensenFor Kitco News
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