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While Commodities Rally, Gold Must Hold $1,290/oz.

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"Gold seems to be lagging the rest of the rallying markets."

Commodity markets as a whole could continue to rally in February, particularly the agriculture and energy markets, but gold needs to hold support at the $1,300 to $1,290 area, market watchers said.

Strength in the stock market is supporting commodities as improvements in U.S. economic conditions could mean greater demand for raw materials, but the outlook for better economic times has pushed investors out of gold and into more risky assets, analysts added.

Stock index futures fell Friday on the first news reports of political demonstrations in Egypt, but since then has recouped its losses. Some agriculture markets like sugar are rallying because of a cyclone in Australia's Queensland region, while soybeans rose on worries over a port strike in Argentina.

Gold, however, seems to be lagging the rest of the rallying markets. Analysts Spencer Patton and Kurt Kinker both point to a strong uptrend line that comes in at $1,290 as critical support. Both believe gold will hold that area and Patton said if gold falls to that region, it will be a good area to buy the yellow metal.

If nearby gold futures fall through $1,254, the next area of support is the $970 area, which is a 61.8% Fibonacci retracement area of the entire bull move from $681, he said. Further, he said, looking at Elliott Wave technical analytical theory, a break of $1,254 would also count as wave five of the five wave count that makes the move complete, meaning the high for gold would stay at $1,431.

If gold avoids breaking $1,290, then it could rebound to $1,460-$1,480, but Zimmerman said that’s less likely. "Any trade adviser looks at risk-reward. There is upside to $1,460 to $1,480, but you risk the downside to $970 to $840," he said.

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