UNITED STATES January 02 2017 11:33 AM
By Neils Christensen of Kitco News
Not only is gold ending its longest weekly losing streak in more than a decade, but it is seeing its first positive yearly gains since 2012.
February Comex gold futures last traded at $1,157.10 an ounce, up 2.2% since last week. This week, gold has benefited from a correction in the U.S. dollar, which has backed down from its recent 13-year highs.
Silver is also seeing a positive week and a solid end to 2016. March Comex silver futures last traded at $16.085 an ounce, 2% on the week and up more than 17% on the year.
Some analysts warn that the latest gains in the precious metals markets could be skewed as a result of thin holiday markets as the precious metal sees its best performance since before the U.S. election; however, some are still calling the latest price action a victory as gold ends the year with gains of more than 9% -- albeit a shallow victory has gold did see gains of more than 30% in the first half of the year. To say the least, 2016 has been a rollercoaster year for gold prices.
However, some analysts are not ready to give up on gold just yet as January and the first quarter is traditionally the strongest period for the yellow metal.
“Gold has benefited from U.S. dollar weakness this week and we are looking for this trend to continue in 2017 as the price action seems to be priming for a strong start to the New Year. Gold has been positive every Q1 since 2005 except for one, and we expect to see another Q1 characterized by anemic economic growth,” said analysts at iiTrader.
Looking ahead to 2017, among consensus forecasts, the median average price is around $1,300 an ounce. Some analysts see gold’s potential as a safe-haven asset in an environment of global geopolitical uncertainty, unknown impacts of President-elect Donald Trump’s proposed fiscal and economic policies, as well as continued low global interest rates.
While several factors continue to favor the yellow metal in the long term, there is a lot more work that needs to be done in the short term. Jim Wyckoff, senior technical analyst at Kitco.com, described the market as “neutral.”
“From a longer-term technical perspective, the year 2016 did see price action negate a downtrend on the monthly gold chart. From a larger-degree technical perspective, gold bulls and bears are on a level playing field. For the bulls to gain keen longer-term technical strength, they must push prices above the 2016 high of $1,375. For the bears to gain fresh longer-term technical power, they must push prices below the 2015 low of $1,050,” he said.
Levels to Watch
Because of the thin volume during the past holiday-shortened trading week, investors will be anxious to see if there is any follow-through buying in the first week of the New Year.
Joshua Mahony, market analyst at IG, said that he would like to see gold push above $1,165 an ounce before he become more bullish on the metal.
However, Russell Browne, commodity strategist at Scotiabank, said in a recent report that while momentum indicators are turning more bullish, he remains negative on the yellow metal as long as prices are below $1,173 an ounce.
On the downside, analysts continue to keep an eye on support at $1,125 an ounce, which represents the last major retracement level from gold lows in 2015 to its July highs.
The Final Say
Next week will see another shortened trading period as markets are closed Monday in recognition of the New Year’s holiday. However, investors and traders will begin to trickle back into the market as the week progresses. The highlight of a series of U.S. economic reports will be Friday’s nonfarm payrolls report for December.
Before the jobs report is released, markets will receive important manufacturing numbers, service-sector data, minutes from the Federal Reserve’s December monetary policy meeting and private-sector employment data.