Gold prices are poised to extend their 2014 rebound and reach $1,400 an ounce, the highest since September, according to technical analysis from Citi Futures and RBC Wealth Management.
Prices yesterday settled above the 100-day moving average for a second straight day for the first time since October. The metal has also closed above its 50-day measure in every session since Jan. 23. The pattern signals prices will rally 8.5 percent by the end of March, Chicago-based Sterling Smith of Citi Futures said.
Turmoil in emerging markets and signs of waning improvement in the U.S. job market helped drive gold prices 7.3 percent higher in 2014 after after a 28 percent drop last year that was the biggest since 1981. Bullion in New York yesterday capped the longest rally since August 2012 after Federal Reserve Chairman Janet Yellen said more work is needed to restore the labor market.
“The sentiment seems to be changing gradually, and gold is attracting bids,” Michael Gayed, the chief investment strategist who helps oversee $250 million at New York-based Pension Partners LLC, said in a telephone interview. “Money printing will continue to help gold. I would say that some people are returning to gold, and some are buying on technical levels.”
Gold futures for April delivery climbed 1.2 percent yesterday to $1,289.80, capping a fifth session of gains. The 100-day moving average is near $1,270.71.
Prices will reach $1,400 by the end of the year if open interest, or the number of contracts outstanding, starts to rise, according to George Gero, a vice president at RBC Wealth Management. The number of contracts yet to be closed, liquidated or delivered dropped to 368,279 on Feb. 4, the lowest since September.
“Once we see more investors return to the market, prices will start going higher,” Gero said in a telephone interview from New York. “The technicals indicate that there is some strength.”
Yellen pledged to scale back the Fed’s debt purchases through “measured steps,” she said yesterday in testimony to the House Financial Services Committee.
Bullion jumped more than 500 percent in the 12 straight years of gains through 2012. The rally accelerated from December 2008 to June 2011 as the Fed expanded its balance sheet through debt purchases and held borrowing costs at a record low in a bid to revive growth amid a U.S. recession. The metal reached a record $1,923.70 in September 2011.
Gold dropped into a bear market in April as some investors lost faith in the metal as a store of value amid a rally in equities and muted inflation. Bullion held in global exchange-traded products slumped 33 percent in the past year, wiping $66.3 billion from the value of the assets.
While prices in New York are heading for a second straight month of gains, Morgan Stanley analysts including Joel Crane see “more pain to come” for gold investors, they said in a report Jan. 22. The bank cut its 2014 target 12 percent to $1,160. Goldman Sachs Group Inc. sees prices at $1,050 in the next 12 months, the bank said in a Jan. 12 report.
“While we have seen some repair, it’s very early to call it a recovery,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a telephone interview. “We need money to start flowing back into the market to see any meaningful change in outlook.”