Gold Prices Holding Gains Ahead Of FOMC Week

(Kitco News) -Gold prices are once again starting the week holding on to near-term strength, hovering just below the $1,300 area.

Some analysts are expecting gold prices to enter a consolidation period as a new trading week begins as markets await the Federal Open Market Committee to release its monetary policy statement on Wednesday.

Electronic trading of Comex February gold futures opened the Sunday North American evening/Monday Asian session at $1,292.80 an ounce, up from Friday's pit close of $1,292.60 an ounce. Activity has been relatively quiet during the start of the Asian markets with prices hitting an early session high of $1,299.20 an ounce. As of 9:06 pm. EST, February gold was trading at $1,296.2 an ounce.

Electronic trading of Comex March silver futures are outperforming gold after opening the Sunday evening/Monday morning session at $18.300 an ounce, up slightly from Friday's pit close of $16.295 an ounce. After a relatively quiet open, silver prices hit an early session high of $18.475 an ounce. As of 9:06 pm. EST, March silver was trading at 18.435 an ounce.

Analysts still remain mixed to the impact Greece’s election results will have on gold prices this week. According to the latest exit polls the left-wing anti-euro Syriza party, won 36% of the popular vote; however the data shows they are still short of winning a majority government.

Edward Meir, commodity analyst at INTL FCStone, said in a note published Saturday that he would expect the election results to exacerbate market tension in the eurozone, which will ultimately provide further short-term support for gold prices.

In an interview with Kitco News on Friday, Julian Jessop, head of commodity strategy at Capital Economics, said that he was not expecting the election to provide new momentum for gold prices if the election results showed that Syriza would have to form a coalition government. He added that a coalition government will reduce the threat of Greece trying force a renegotiation of its bailout terms.

Looking at technical factors, Avi Gilburt, an independent trader at ElliottWaveTrader.net, said that he is looking for a consolidation period as gold prices are within the third wave, according to Elliot Wave principals.

“I still need to see further validation of this move, before I believe that a long-term bottom is in place,” he said.

Looking at the price of SPRD Shares (NYSE: GLD), the world’s biggest gold-backed exchange traded fund, Gilburt said as long as prices stay above the support area between $119.50 and $121.75, there is room for gold to move higher.

He added that in this current pattern, he would expect prices to rally to $130; however, it won’t be a clear path higher.

“I’m just not convinced yet that we have seen the bottom in this market so I am watching the support levels. As long as prices stay above there we have room to move higher but then I would expect to see a pullback and we will eventually see if $119 can hold,” he said.

Courtesy: Kitco News