Gold rallies on weak dollar, but gains capped as rate hike is still on the table - Analysts
Remarks from Federal Reserve Chair Janet Yellen helped to weaken the U.S. dollar, as investors digested her dovish tone. Gold was thus pushed to multi-week highs overnight.
Analysts at Commerzbank commented that the gains will be limited as interest rates are still on the table, although with no timing provided.
"Our economists continue to expect the cycle of rate hikes to begin in September. Until then, the gold price is unlikely in our opinion to make any significant gains because of the uncertainty surrounding this question. What is more, the currently weak investment demand and subdued physical demand are likely to prevent gold rising lastingly above the $1,200 per troy ounce mark again," they say.
Meanwhile, analysts at iiTrader note that rates might rise slower from 2015 to 2017.
“The Fed is still on track for a September liftoff after 15 of 17 members expect the first rate hike to occur in 2016. However, we have been saying the wild card now has become the pace at which they look to raise rates and more members now think that rates will rise slower from 2015 to 2017.”
According to iiTrader, higher prices above $1,200 an ounce could spark a short covering to around $1,220 an ounce.
However, they also caution that gold traders should watch resistance at the 100-day and 200-day moving averages at $1201.30 an ounce and 1209.60 an ounce, respectively.
