The London gold price rallied 4.93 percent last week, its biggest weekly rise since Feb. 12.
Precious metals have been shining recently as the US dollar has eased amid weak economic data in the United States and the Bank of Japan opting to hold interest rates unchanged.
The yellow metal has soared nearly 22 percent so far this year.
It hit US$1,303.60 per ounce during intraday trading Monday, the highest since January last year, but closed a bit lower on profit-taking.
Holdings of the precious metal in the SPDR Gold Trust (02840.HK), the world’s largest gold exchange-traded fund, increased 2.59 percent to 824.94 metric tonnes — the highest level since December 2013 — on Monday from last Friday, the biggest increase since Feb. 22.
The price of gold has been consolidating for over a year after hitting US$1,306.20 in January last year.
It has now revisited the US$1,300 level but failed to rise further and slumped to US$1,287 per ounce shortly after.
Investors should watch to see whether the yellow metal can break the previous high. If so, it might rise further to US$1,310 or US$1,318.
In the meantime, the US dollar continued to soften against the Japanese yen Tuesday, touching an 18-month low of 105.52 yen per US dollar.
The market is closely watching to see whether the US dollar will break the previous trough of 105.18 on Oct. 15, 2014.
If it falls below this level, it might correct further.
A 38.2 percent Fibonacci correction of the cumulative rally between 2012 and 2015 would take the US dollar to 107.18 yen.
The US dollar has already tumbled below that level. The next support could be 101.44.
Nevertheless, sharp gains in the yen may make policymakers in Japan uneasy.
They might make vocal statements if not intervene directly to weaken the yen.
The resistance levels are around 106.3 and 107.6 yen to the US dollar.
Meanwhile, the Aussie dollar dropped against the US dollar to a low of 0.7556 Tuesday after the Reserve Bank of Australia unexpectedly cut interest rates to record lows.
It’s critical to see whether the Aussie dollar could stabilize at 0.75, a level from which it managed to bounce during previous two corrections.
This article appeared in the Hong Kong Economic Journal on May 4.
Translation by Julie Zhu
[Chinese version 中文版]
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