By Barani Krishnan
Investing.com - Gold displayed renewed fire on Monday to scale a more than three-month high that gave longs in the market optimism that a return to $1,900 might be possible after all.
“Gold prices are rising and up against massive resistance,” Ed Moya, analyst at online trading platform OANDA, said as both futures and spot price came within striking distance of $1,870, a level last seen on Feb. 1. “Bullish momentum could kickstart a bigger rally towards the $1,900 level.”
Benchmark gold futures on New York’s Comex settled at $1,867.60, up $29.50, or 1.6%. The session peak was $1,869.25.
The spot price of gold, reflective of real-time trades in bullion, was at $1,866.62 by 2:35 PM ET (18:35 GMT) after an intraday high at $1,868.51.
Traders and fund managers sometimes decide on the direction for gold by looking at the spot price — which reflects bullion for prompt delivery — instead of futures.
Gold’s breakout began Sunday evening in New York as the Asian session for the new week went into play.
Even prior to that, longs in the yellow metal had an interesting couple of weeks amid arguments about runaway U.S. inflation after a raft of upbeat data on consumer and producerprices, industrial production and consumer confidence.
The Federal Reserve acknowledges that there are price pressures arising from bottlenecks in U.S. supply chains struggling to cope with demand in an economy reopening after months of pandemic-suppression.
But the central bank insists that these inflationary pressures are “transitory” and will fade as the economy makes a full recovery from the pandemic. It also says it does not see the need for now to raise interest rates.
Such an environment heightens gold’s natural role as an inflation hedge, say longs who are emboldened to attempt first a return to $1,900 levels last seen in January, before a further push to record highs of $2,000 set in August.
Monday’s breakout in gold came on the back of relatively-calm U.S. Treasury yields and the dollar that further enabled its upward momentum.
Yields tied to the 10-year Treasury note was up 0.3% at 1.64%. The Dollar Index, which pits the greenback against the euro and five other major currencies, was down 0.2% at 90.13.
The relative heaviness with Treasury yields “has done wonders for bullion and that trend should remain intact,” Moya added.
Investing.com’s 3-year weekly chart for Comex gold shows the next plausible target at $1,945.70, which will be a peak not seen since the Jan. 6 intraday of $1,966.80.
And if gold does not retreat meaningfully after that, it means that $2,000 could be on cue, precisely $2,101.60 — which comes just slightly beneath the all-time futures high of $2,107.60 set on Aug 7.