(Kitco News) - Gold prices jump back above $1,100 an ounce as investors seek refuge against the backdrop of falling stock markets and tumbling oil prices Wednesday.
But the question remains: how long could this safe-haven allure last?
“People were saying safe-haven allure was gone,” Jim Wyckoff, Kitco’s senior technical analyst, told Kitco News over the phone Wednesday. “But this safe-haven bid is going to last as long as there is anxiety in the marketplace, and that’s going to be guaged by the stock market.”
Last time gold futures jumped above this key level was on January 7 when the Chinese stock market went haywire, and gold managed to close above $1,100 for the first time in two months. However, despite hovering around that key level for the subsequent two trading days, the metal has yet to close above that level again.
A struggling Chinese economy, Wyckoff continued, remains the underlying element impacting markets.
Gold futures saw a double-digit rally Wednesday as the Dow Jones dropped some 500 points, the S&P 500 reached levels last seen in 2014 and oil prices dipped below $27 a barrel for the first time since September 2003. February comex gold futures were last quoted up $15.40 at $1,104.50 an ounce.
“As we speak now, gold prices are already in a choppy 4-week old uptrend,” Wyckoff said, noting that the metal should now focus on posting multiple closes above $1,100 in order for prices to start trading sideways to higher.
Analysts at UK-based research firm Capital Economics also highlighted gold’s better performance Wednesday.
“While all metals are still trading well below their 200-day moving averages, gold and silver have recently broken above their 50-day moving averages,” they said in a research note. “This is normally considered a bullish signal for prices.”
Over the past month, the analysts continued, gold has been the only metal ending the month higher despite the Federal Reserve’s December rate hike, the first one since 2006.
The analyst also highlighted the increase interest in gold as seen in speculative positioning and ETF holdings.
“As investors became more positive on the prospects for the gold price, short positions in the futures market were slashed, prompting a doubling in the number of net long positions from a month prior, albeit from a low base,” they said. “Gold ETFs bucked the trend, with assets under management increasing by about 1%, on safe-haven demand.”
By Sarah Benali of Kitco News; sbenali@kitco.com
Follow me on Twitter @SdBenali
