NEW YORK (Scrap Register): One commodity analyst says he is waiting to see if the gold market can beat its December curse as the market is starting the month on a strong note, trading just below the critical resistance level of $1,240 an ounce.
In the last three years, December has not been a kind month for gold, with the precious metal consistently hitting its yearly lows during the month. However, Andrew Hecht, creator of the Hecht Commodity Report, said in a commentary on Seeking Alpha that there are signs that this year could be different.
He noted that since hitting its lows in August, the gold market has performed relatively well, even in the face of a strong U.S. dollar.
“Gold has had every reason to move to the downside over the past few weeks, but it remains at the $1225 level,” he said. The sign of strength in an environment that should be causing weakness is a good sign for the price path of the yellow metal.”
Despite some growing optimism, Hecht said that the precious metal isn’t completely out of the woods yet. The Federal Reserve’s monetary policy decision scheduled for December 19 remains the biggest risk and opportunity for gold his month, he added.
“The Fed has done an excellent job preparing the market for rate hikes, and the next hike that will take the short-term rate to 2.25-2.50% is likely baked into all markets,” he said. “Therefore, the devil will be in the details when it comes to the December 2018 meeting of the FOMC as their plans for 2019 and beyond will drive the value of the dollar, gold, and markets across all asset classes.”
Gold’s push back to its critical resistance level has been in part due to recent comments from the Federal Reserve Chair Jerome Powell.
Powell pointed out that the current U.S. interest rates are just below “neutral” levels, adding that the Fed will remain data dependent and without a set path on future interest rate adjustments.. The comments were made at the at the Economic Club of New York and were deemed dovish by markets.
“The latest comments from Chairman Powell last week indicated he may be softening his hawkish approach to monetary policy,” said Hecht.
In its last economic projections, released in September, the U.S. central bank signaled that it sees three rate hikes next year and one rate hike in 2020.
“A retreat from their tightening could light a bullish fuse under the gold market which is holding these days with one eye on the central bank and the other on the dollar,” said Hecht.