Bullion Reclaims 200-Day Moving Average as ETF Inflows Gain Steam
Gold didn’t rest long after taking out the psychologically key $1,300 level on Thursday. Early Friday the momentum continued as bullion roared past $1,320.
Gold has now steamrolled over two major technical levels: its 100-day moving average of $1,270, and now its 200-day moving average around $1,306.
“Gold continues to trade extremely well and it is basically taking out one key resistance level after the other,” BofA Merrill Lynch analyst Michael Widmer said. The metal has finished the week up about 4% and in a price range unseen since early November.
A major reason for this resurgence has been positive inflows into gold ETFs. “The world’s largest gold-backed exchange-traded fund saw a spike in holdings of the metal this week,” MarketWatch reported, hitting “its highest total level since Dec. 20.”
Silver’s performance was even stronger than gold’s, with the white metal finishing the week up about 7.5%, at $21.42 — its highest price since early November.
“Silver has caught up with gold after it finally managed to break the key $20.20 mark on Friday,” said Fawad Razaqzada at FOREX.com.
A succession of poor economic data also has boosted precious metals by pressuring the Federal Reserve to reconsider the pace of its stimulus-tapering program. On Thursday it was revealed that January retail sales plunged, while initial weekly jobless claims also rose. And on Friday, another report showed that factory production fell in January by the most since May 2009.
“Gold bulls are taking advantage of (Federal Reserve chief Janet) Yellen’s comment that the taper is not on a fixed path,” said Jason Rotman, president of Lido Isle Advisors.
“The deterioration in the job market is becoming increasingly evident,” said Jeff Sica of Sica Wealth Management. “People are realizing that the economy still needs stimulus to grow, and that is keeping gold supported. Yellen sounded dovish. Today’s key economic numbers makes it clear that all is not well.”
“The economic data today helped reaffirm the idea that the Fed is tapering too fast,” said Dan Denbow of the USAA Precious Metals & Minerals Fund. “There is a shift in sentiment, which is helping prices move up. The emerging-market situation and physical demand continues to remain supportive.”
Heading into next week, the next target for gold is the $1,350-60 level. “We said once it moves past the 200-day moving average, we would easily see $1,324, and moving toward $1,361. There are certainly technical factors behind these moves,” said Bart Melek at TD Securities. And RBC Capital George Gero is calling for $1,350. “I think the bears are temporarily hibernating,” he said. “You’ve got momentum traders in here. Over $1300, they come in.”
More information can be found online at http://www.goldbullionadvisors.com
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