(Kitco News) – Rising risk-off sentiment in equity markets Thursday is helping gold prices battle against significant momentum in the U.S. dollar, according to some analysts.
Gold prices are seeing modest gains at the start of the North American equity open as the Dow Jones Industrial Average starts the day down more than 200 points. At the same time, the U.S. dollar index is trading at a two-year high. The three-digit Dow sell-off comes after equity markets saw record highs earlier in the week.
June gold futures last traded at $1,283.70 an ounce, up 0.34% on the day, while the U.S. dollar index last traded at 98.10, relatively flat on the day. The Dow last traded at 26,358 points, down 238 points on the day.
“It is impressive to see gold hold such ground while the U.S dollar is broadly gaining against its counterparts and the dollar index is trading to the highest level since May 2017,” said Bill Baruch, president of Blue Line futures, in note to clients.
Jim Wyckoff, senior technical analyst at Kitco.com, also sees some optimism within the gold market as the metal has weathered a strong U.S. dollar fairly well. He added that along with falling equity markets, rising oil prices could be providing a boost to gold.
“The rally in the crude-oil market to a six-month high this week somewhat mitigates the bearish impact of the stronger dollar on the metals, given that crude oil is arguably the leader of the raw commodity sector,” he said.
George Gero, managing director at RBC Wealth Management, said that it appears the gold market is “learning to live with continued dollar demands.”
He added that global worries, which are reflected in the equity market sell-off, are helping to boost gold. However, he also said that gold prices need to push above $1,300 an ounce to attract new buyers to the marketplace.
Phillip Streible, senior market analyst at RJO Futures said that investors see value in gold at current levels.
“Gold managed to hold support at its 200-day moving average and bargain hunters are now coming in looking for value with equities at record highs,” he said. “Buying gold at the 200-day moving average looks to be a good move for some investors.”
Commodity analyst at Commerzbank said that the rally in the greenback is less about U.S. dollar strength and more about other currency weakness. They noted that the euro has taken a hit Thursday following disappointing economic data, which raises expectations that the European Central Bank will continue to ease its monetary policy.
“Gold in euros even profited from the exchange rate development and climbed to €1,145 per troy ounce,” the analysts said.
Although gold is holding up well against the U.S. dollar, some analysts doubt that this trend is sustainable.
“We remain skeptical of the market’s ability to rally definitively up and away from the $1.275 level,” said analysts from the Hightower Report.
The analysts said that they are watching support at gold’s 200-day moving average, which was tested Wednesday, which currently comes in at $1,266.90 an ounce.
“A break below there would project to $1,253. Pushed into the market, we would be a seller of June gold at $1.282,” the analysts said.
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