Investor sentiment continues to improve for Gold, according to Michael MacDonald, Head of Research at UK-based independent research firm XATS, who thinks there are early signs of an asset rotation into commodities.
Looking at a Chart of XAU/USD, Macdonald highlights that Gold is now approaching critical resistance at $1375 (the 2016 high) and $1380 (the 38.2% Fibonacci retracement of the 2011 to 2015 fall). Macdonald thinks that rising momentum studies suggest this resistance will be broken and there will be continued gains in the coming months. Should that happen, the next target will be $1420.75, which is the 50% retracement of the 2012 to 2015 fall, and then $1500, where several retracement levels coincide, suggesting it may be a more significant level.
Significant support can be found at the $1200 level, which Macdonald says should underpin any immediate pullbacks. An expected close below here, however, would threaten his bullish forecast and delay higher levels.
Of the other commodities, Macdonald says Precious Metals in general and Energy are currently the best performers while Base Metals are showing signs of exhaustion. Agrigultures are under pressure but he expects them to turn around in the coming months.
See Gold Chart.