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Gold unlikely to maintain 'Prolonged Bullish Path' in first quarter

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NEW YORK (Scrap Register): Citi Research questions whether gold will be able to maintain its recent upward momentum in which Comex gold prices have rallied some 4% since mid-December.

“Gold prices have rallied in recent sessions as a function of short-covering activity and investor bottom-picking. However, Citi said, a prolonged bullish path for bullion is unlikely to persist through 1Q.

While many market participants likely read minutes from the December meeting of the Federal Open Market cautiously and perhaps even as a tad dovish, Citi analysts said we think that the Fed was clear in affirming a more hawkish stance.

Citi said it “remains in the strong U.S. dollar camp, with the possibility of a cross-border tax adjustment policy yet another reason to stay bullish the greenback despite the trade-weighted USD index dropping several points to start the year.”

Against this backdrop, Citi says stabilizing interest rates and a steadier dollar may support gold in a $1,150 to $1,200 band in the near term before markets revert lower to a $1,100 to $1,140 range, which analysts “see as a more likely price path for the yellow metal as opposed to a sustained push above $1,200/oz.”

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