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Don’t Get Too Excited About Gold’s Bounce; Interest Rates Are Going Higher
While bargain hunters are stepping in to push gold prices off Friday’s two-month low, some analysts are warning traders and investors to use some caution at current levels.
Lukman Otunuga, research analyst at FXTM, said that short-term bulls appear to be exploiting renewed geopolitical uncertainty as rhetoric between North Korea and U.S. President Donald Trump continue to heat up. However, he warned that upside potential for the yellow metal could be limited as the U.S. dollar continues to strengthen on rising potential for a U.S. interest-rate hike in December.
“Technical traders will be paying very close attention to how prices react above the $1,280 resistance level. A technical bounce seems to be in play, with bears still in firm control below the psychological $1,300 level. Sustained weakness back below $1,280 should forge a path back towards $1,267,” he said in research note Monday.
December gold futures last traded at $1,282 30an ounce, up 0.58% on the day.
Looking at rate expectations, CME 30-day Fed fund futures are pricing in an almost 92% chance of a rate hike by December. Expectations have spiked higher compared to a week ago, when markets were pricing in a 76% chance.
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