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Gold needs to push past $1,240 an ounce to signal a trend reversal

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NEW YORK: Although optimism is starting to grow among gold traders, one technical analyst warns that it is still a little too early to turn overly bullish on the precious metal.

In a recent interview with Kitco News, Greg Harmon, founder of Dragonfly Capital, said while gold has bounced off recent support at $1,220 an ounce, prices need to push past their October highs above $1,246 an ounce, before he becomes overtly positive on the yellow metal.

“We are starting to see higher lows, but we still need to make higher highs,” he said. “A push above $1,240 an ounce would signal a trend reversal. We see some good momentum on this bounce, but we still need a little bit more.”

Currently, gold prices have managed to push higher for four consecutive sessions. According to some analysts, the market is seeing renewed interest as investors start to reprice interest rate hikes in 2019 as concerns over global economic growth continue to grow. The December gold futures last traded at $1,224.70 an ounce, up 0.14% on the day.

The CME Fedwatch Tool shows that although markets are pricing in two interest rates next year, expectations for four increases has been pared back sharply from the previous week.

The risk-off sentiment among traders was acutely felt Monday as traders once again fled equity markets, with the S&P 500 last trading at 2686 points, down 1.8% on the day.

Although gold has some solid momentum, Harmon said that the precious metal still has a significant problem – it has been stuck in a $200 range for the last five years.

“When you look at gold, it really hasn’t done anything since 2013,” he said.

In the current environment, Harmon said that investors should look at playing the moment within the trade: “Buying when the price bounces off the bottom and selling with it bounces off the top.”

Harmon added that if prices can push through the October high, momentum traders could target the next major resistance level at $1,300 an ounce.

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