Gold's longest rally since 2012: Crosses $1,200; next stop $1,300?

Spot gold price busted through the $1,200/oz resistance for the first time in three weeks this morning, marking the longest rally underway in the yellow metal since 2012.

Gold price was hovering at $1,201.80 per troy ounce at 10.40am UAE time (6.40 GMT) – the highest it has been since March 6.

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The yellow metal was up about $3 over yesterday’s close of $1,197/oz, and more than $50 higher than last Wednesday’s close of $1,148.30 per troy ounce.

Gold is now up for the seventh straight session, a feat it last accomplished in August 2012.

A weaker dollar thanks to soft jobs data is seeing investors once again favour the safe haven appeal of gold. By aligning with gold, investors are betting that the US Federal Reserve will keep interest rates low for the time being, making gold look more attractive.

“The Federal Open Market Committee meeting on Wednesday was the highlight of this week,” said Ole Sloth Hansen, Head of Commodity Strategy at Saxo Bank.

“The statement by Fed chair Janet Yellen left the door open for a rate hike in September but at the same time the committee turned more dovish on how much rates need to rise,” he said.

In his latest weekly commodity report, Saxo’s Hansen said a sharply higher dollar against most other currencies, a subdued inflation outlook combined with a recent host of weaker-than-expected economic data provided the ammunition for the change in tone. “The result was a big risk-on move into stocks and bonds, while the dollar experienced a couple of hours of turmoil, especially EUR/USD, which had its second most volatile day ever,” he said.

“Gold and especially silver staged a comeback following the Federal Open Market Committee meeting on Wednesday,” he noted. “Although a rate hike is still on the cards, Fed chair Janet Yellen seems to have joined the ever increasing crowd of central bank doves across the world,” he wrote.

“Gold rose for the first time in three weeks after, just like in November and December, having struggled to make it much below the $1,145/oz to $1,150/oz area of support,” he said in the report published on March 22, a couple of sessions day after gold began its latest ascent.

“A weaker dollar and falling bond yields returned some support to precious metals, with gold and silver enjoying the first positive week in three,” he added.

In an interview televised on Tuesday’s episode of ‘Futures Now,’ MacNeil Curry, Bank of America-Merrill Lynch’s head of global technical analysis, said global ammunition was building to propel gold beyond $1,300 within a couple of months.

“Rates are headed lower, and the dollar is likely to remain in a corrective sequence in general,” said Curry. “Gold should rally in that environment.”

According to him, a near-term “correction” in the dollar over the next couple of weeks might lay the groundwork for a sustained and sizeable rally in gold that could see it break out to $1,307 by the end of May.

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