Gold Technicals Mixed But Moving Towards Resistance At 1160

Gold continued to rally on Thursday soaring to 1156.00 breezing right through the resistance level at 1150.00. Gold is up over $14 adding to its steady gains this week. Gold has climbed this week from a low at 1126.70 gaining $30 as traders shift their focus to the nonfarm jobs report due today.  Silver was 19 points higher at 14.83 while platinum added $19 to 897.

BloombergBusiness reported that gold this year has outperformed all its peers in the Bloomberg Commodity Index, a measure of returns on raw materials, with an 8.9 percent rally that’s seen it close above its average over the previous 200 sessions for the first time since October. This could be a sign the rally is ready to peak, according to Adam Finn, Triland Metals’ head of precious metals in London. The past three times bullion closed above the 200-day average, it sank on average by 4.6 percent in the following month. The metal also broke a Fibonacci retracement level at 1,135 on Wednesday on its way to Thursday’s three-month peak at 1,156.60.

Yet analysts say its clear technical break in the past day is not a definite buying signal.

“It really indicates moves probably only up to around the 1,160-1,165 area before it runs into trouble,” said Cliff Green, an independent technical analyst.

“You are not necessarily seeing new longs coming in but you are seeing short covering.”

Others agree that 1,160 could be strong resistance. That encompasses the Oct. 29 high at 1,162.36, and another Fibonacci level at 1,157.

Gold bulls are starting to rear their heads with the price of the precious metal hitting three-month highs, but their optimism could be premature due to uncertainty over U.S. interest rates. Gold was last above $1,200 in June 2015 when equity market volatility sent investors scrambling for safety.

Gold typically rises when the dollar slides and falls when the dollar rises. The link is with interest rates, which when they rise also push up the opportunity cost of holding the metal, which earns no yield and costs money to store and insure.

Against a basket of currencies, the greenback fell to a three-month low of 96.259 in the aftermath of New York Fed President William Dudley’s warning that a weakening outlook for the global economy would have to be taken into account for upcoming rate decisions.

“We don’t think this recent strength in gold is sustainable, this could be a false dawn,” Capital Economics commodities analyst Caroline Bain said. “We’re relatively positive on the end-2016 outlook for gold, but we’re not going to say gold is going to strengthen now.”

Gold’s prospects will depend on U.S. data, starting on Friday with the non-farm payrolls, used as a gauge of the health of the U.S. economy and prospects for Fed rates. Analysts say the market is pricing in a lower probability – about 60 percent – of a 25 basis point rise in benchmark U.S. rates this year.

Weaker-than-expected U.S. non-farm payrolls data due on Friday could reinforce expectations for slower tightening by the Fed, potentially giving gold a further boost, although Green says that would not be reason to rush in.