Gold futures moved sharply higher on Tuesday to a more than three-week high when investors returned after the extended Christmas holiday week-end. The rally was fueled by a weaker U.S. Dollar and increased demand for metals.
February Comex Gold futures settled at $1287.50, up $8.70 or +0.68%.
Prices were also supported by a lackluster trade in U.S. equity markets. Geopolitical tensions may have also helped underpin the market. Gains may have been limited by a rise in U.S. Treasury yields.
On Tuesday, stocks closed lower across the board. U.S. equities have been losing ground since the passage of the largest tax reform bill in 30 years last week.
North Korea was in the news. On Tuesday, the United States announced sanctions on two North Korean officials behind their country’s ballistic missile program on Tuesday, while Russia reiterated an offer to mediate to ease tensions between Washington and Pyongyang.
Russia is ready to act as a mediator between North Korea and the United States if both parties are willing for it to play such a role, the Kremlin said on Tuesday.
In other news, the U.S. Commodity Trading Commission (CFTC) on Friday reported that hedge funds and money managers had increased their net long stance in gold in the week to December 19.
Forecast
Gold prices are trading slightly lower early Wednesday. Volume is expected to continue to come in on the light side which means we may see another session of exaggerated moves. The market is within striking distance of a major 50% level at $1290.20. This is the last barrier before the last main top at $1303.40.
Technical factors are also helping to drive prices higher. Hedge fund buying is getting more aggressive now that gold has crossed to strong side of the 200-day moving average.
Wednesday is North Korea’s Constitution Day Holiday so we may see some hedging against a negative geopolitical event.
Look for gold to strengthen over $1290.20 and weaken under $1278.50.
This article was originally posted on FX Empire