Gold price rises but lacks direction with risk aversion on the rise

on Dec 3, 2014

**Gold Price**

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins., Wednesday, December 3: The price of gold has risen so far in today’s trading session but remains close to $1,200 with little fresh incentive for the price to move in either direction.

Gold for immediate delivery had gained $6.76, or 0.56 percent, to $1,204.89 as of 09:45 GMT, and was trading 0.18 percent above its 50-day simple moving average of $1,202.63, having on Monday managed to close above the measure for the first time since 21 October.

“At current levels, gold appears to be in no-man’s-land. The market has traded within an $80-range over the past month or so and needs fresh catalysts to get guidance on where it goes next,” said UBS analyst Edel Tully, as quoted by The Bullion Desk.
According to her, traders are likely to become more risk averse as we head towards the end of the year, with rewards harder to earn under current market conditions, while there will be limited time to recoup any losses incurred at this point.

Friday’s release of the US non-farm employment change report for November may provide clearer direction to the market. IG reports that the unemployment level is expected to remain unchanged at 5.8 percent while the number of jobs created is forecast to have risen to 222,000 from 209,000 in the preceding month. FastMarkets quoted Howie Lee, investment analyst at Phillip Futures as saying:

“With nonfarm payrolls being released this Friday, we believe gold should start facing massive downward pressure once again as the dollar appreciates”.

On the COMEX in New York, gold for December delivery had risen $5.9 to $1,204.0 as of 09:41 GMT. At last check, the more actively traded February contract stood at $1,204.7 up 0.59 percent intraday. According to a note from Commerzbank, gold will fall to $1,125 on average in the second quarter of 2015 but the bank expects it to climb back to $1,250 by the end of the year as pressure eases.

“We expect the gold price to remain under pressure initially in the first half of next year on the back of growing speculation about increasingly imminent interest rate hikes in the United States […] The gold price is likely to bottom out at the onset of the cycle of rate hikes in the second quarter”.

Once the Fed starts to move and begins raising interest rates, the pressure on bullion is likely to abate “as was the case during the Fed’s last series of interest rate hikes between 2004 and 2006”. Commerzbank sees the precious metal deriving support from revived Chinese demand and inflows into gold-backed exchange-traded funds (ETFs).

Bloomberg quoted Stephanie Aymes, head of technical analysis at Societe Generale SA, as saying that the outlook for gold remains bearish. The metal will maintain its downward trend as long as prices don’t climb above $1,225 to $1,240. Aymes added that bullion may slip to about $1,085 in the next three months.


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