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(Kitco Information) – The gold market seems to be on the cusp of breaking a serious resistance level and is price motion is according to Bank of America’s name for the valuable metallic to hit all-time highs by the third quarter of 2020, the bank mentioned in a analysis notice.
Whereas gold’s eight-week buying and selling vary has been irritating for some traders, analysts at Bank of America mentioned that the current sideways sample has performed an necessary position for the market as costs attain their highest stage in practically eight years.
“During the last eight weeks, price action consolidated into a range that, for two reasons, is very important for the uptrend we’ve been calling for. For one it has given momentum indicators time to cool off such as the daily RSI [Relative Strength Index] declining to 42 and weekly RSI falling to 56. Second it has allowed net non-commercial positioning (adjusted for open interest) to correct from all-time highs,” the analysts mentioned of their report.
The analysts mentioned that the $1,800 stage is an necessary long-term resistance level, and a break can be a major transfer. They famous that this stage has been examined 3 times since costs fell from the 2011 all-time highs. August gold futures final traded at $1,785.30 an oz., up 0.18% on the day.
“The range breakout targets $1,900 while the head-and-shoulders continuation confirmed in April targets $1,947. These patterns say gold can make a new all-time high in the 2H2020 with Q3 on our mind,” the analyst mentioned.
Not solely is gold’s technical outlook optimistic, however the bank famous that sentiment stays agency. In accordance with the bank’s month-to-month charges and international exchange sentiment survey, gold is the third hottest risk-off asset, in response to 13% of respondents.
“In other words, long gold trades are popular but it is not the leader of the pack. A sentiment dip remains a risk but with U.S. rates pinned to the ZLB, COVID-19 reopen risks, trade rhetoric returning and U.S. elections around the corner, we’d prefer to see sentiment much more bullish after risks dissipate to consider being a contrarian,” the analysts mentioned.
Bank of America has been pretty bullish on gold since central banks have flooded monetary markets with liquidity in response to the financial devastation created by the COVID-19 pandemic. In April, the bank mentioned that it sees gold costs pushing to $3,000 an oz. inside 18 months.
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