Gold spikes, heads for a major move higher next week

Momentum has shifted back in gold's favour for now, experts said, report agencies.

The yellow metal could be on the brink of another rally as it tops key resistance levels and moves towards $1,800 an ounce, according to them.

Gold has wrapped up its second consecutive week of gains after a positive start to Q2 amid a weaker US dollar and retreating US 10-year Treasury yields. Last week, June Comex gold futures traded at $1,779.90, up 2.0 per cent in seven days.

"The move in gold has been predominately driven by the US dollar, which is continuing to drop. The dollar index is at 91.5 right now. Very important to note, we've seen a pretty significant decline from the 10-year yield and along the curve broadly. All of that has driven gold to the upside," said Bart Melek, TD Securities head of global strategy.

The momentum is definitely on gold's side right now, RJO Futures senior commodities broker Daniel Pavilonis said.

"If we can close above $1,815 next week, we have a good shot at a very momentous move again to the highs. Possibly continue gold's secular bull market," he said.

"Markets have calmed down a bit. We had so much pressure from the Federal Reserve and the European Central Bank trying to ease tensions in the yields, and it worked. And what they have been doing behind the scenes is also working, giving metals some reprieve," he added.

The European Central Bank (ECB) and the Bank of Canada (BoC) interest rate announcements are on the radar next week. They come just one week ahead of the US Federal Reserve's April 27-28 monetary policy meeting.

FXTM market analyst Han Tan said the weaker dollar has finally allowed gold to step out of its tight trading range.

"The greenback's support has been eroded with 10-year Treasury yields moving below the psychologically important 1.60% mark, which in turn has allowed spot gold to break above its 50-day simple moving average for the first time since early February," said Mr Tan.

Next week also marks the Federal Reserve media blackout period ahead of its Apr 28 monetary policy announcement.

ING said that no additional Fed speakers could mean a weaker US dollar, which is beneficial for gold.

"A quieter week for US data and the Fed in blackout period could favor a continuation of benign market trends and a slightly weaker USD," the ING strategists wrote.

There is no significant resistance for gold until the $1,800, said LaSalle Futures Group senior market strategist Charlie Nedoss. "The $1,809.40 is the 100-day moving average, and over time we will hit it."

It was key that the precious metal didn't close below $1,736.40 - last week's lows, Nedoss added. "A lot of this has been data-driven," he said.