Gold Surprises Traders Climbing Over $1100

Gold jumped over the $1100 price level on Monday as Federal Reserve speakers seemed unsure of what they will do come September. The conflicting comments helped traders move back to precious metals as the commodity was trading below its support level. Even though many major brokers including Citi and Goldman as well as JPMorgan are all predicting the metal will remain bearish falling as low at $1000 per ounce.

Gold tentatively surged on Monday to hit its highest level since June 21, when a short-lived relief rally occurred one day after a rapid collapse brought the precious metal down to a new 5-year low. Monday saw spot gold briefly hit a high above 1108 before paring some of those gains by the afternoon.

Monday’s surge follows weeks of consolidation and a new 5-year intraday low of 1077 that was established in late July. In the process of that consolidation, the price of gold formed a classic bearish pennant pattern that, if it had been broken to the downside, would likely have served as a downtrend continuation towards lower lows.

Most notably, while the US dollar pulled back on Monday, the greenback should continue to see gains moving forward as the Fed enters into an impending cycle of tightening monetary policy, with the first rate hike expected to begin by the end of this year. Any continued strengthening of the US dollar will place continued pressure on the price of gold, potentially constraining any substantial recovery.

Gold traders have been anticipating an interest-rate hike for September, and Fischer’s remarks to Bloomberg TV this morning delivered a shot in the arm to gold and other precious metals, including silver. Gold, which offers investors no interest payments, could lose some of its appeal to higher-yielding assets.

Fischer’s comments deflated the Dollar Index, which is a measure of the greenback against a basket of six rival currencies, which was 0.2 percent lower at 97.5630 this afternoon.

A weaker dollar increases the appeal of dollar-denominated currencies like gold. The dollar weakened on prospects of a delay in timing of the Federal Reserve’s first rate hike in nearly a decade.

Copper gained steadily on Monday on hopes of Chinese stimulus moving from 2.32 to 2.39 and this morning the metal gave back some of its gains to trade at 2.38. Copper prices climbed off from a six-year lows hit earlier on Monday as bets that China would have to unholster more stimulus overcame demand worries after trade worsened in July. China is under growing pressure to further stimulate its economy after disappointing data over the weekend showed another heavy fall in factory-gate prices and a surprise slump in exports. A slump in the prices of crude oil, aluminum and copper deepened Monday following the release of Chinese trade data that appeared to confirm market expectations that demand will remain slack in the in the world’s biggest market for basic industrial commodity inputs.