Risk aversion among year-end buyers and short-covering boosted gold futures, but the rally could be short-lived, with the stronger dollar keeping a lid on further gains.
Gold futures jumped more than 2 percent, breaking above the key $1,200-per-ounce level, as traders used a weaker dollar Tuesday as an excuse to buy. Worries about Greece’s election outcome and tensions between Russia and the West also sent buyers into the metal. The dollar index was down 0.3 percent to 90.21.
Ari Wald, technical analyst at Oppenheimer Asset Management, said gold’s move higher is temporary, and he sees it soon heading lower, with new lows likely in 2015.
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“It’s just bopping around in the same kind of range its been in for the last couple of weeks,” said Wald. That is $1,170 on the downside, and $1,210 on the upside.
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“I think important to me are that the moving averages are still sloped lower,” he said. “I think it’s going lower. I think a lot of these commodities that are priced in dollars are going to be pressured here. It’s going to to keep going lower, and I would expect new lows in 2015. I think there’s a risk you could see $1,000.”
George Gero of RBC said short-covering by Asian investors helped drive gold higher Tuesday but other factors came into play. For instance, there were buy stops at $1,190, and now $1,200 is a key level for gold. If it breaks that, the next level to watch on the upside would be $1,225.
Gero said funds are also “window dressing” in the final days of the year, since some are under-invested in gold.