The Christmas Rally Continues and May Become a New Year Rally

Gold declined throughout the first part of this month up until the lows achieved on December 11^th. At this time, prices traded to the monthly low of $1238 per ounce. From that point forward, gold prices steadily gained value, gaining almost $60 in the second half December. For gold traders, there were undoubtedly 12 days of Christmas this year.

As of 3:30 PM Eastern standard time, gold futures are currently trading at $1296.70 per ounce, which is a gain of $5.30 (+0.40%) on the day. This most recent gain in gold takes the gains achieved in 2017 from 10% to 12%. Although these increases are dwarfed when compared to the 25% gains witnessed in the Dow Jones Industrial Average, they are still respectable, to say the least.

Spot gold is currently fixed at $1294.70, which is a net gain of $7.90 on the day. According to the Kitco Gold Index, today’s gains are composed of dollar weakness which is adding $5.15 of value, and buyers bidding up the precious yellow metal accounting for $2.75 of today’s gains. Recent dollar weakness has provided much of the tailwinds which have moved gold, taking prices to a 10-week high.

Recent dollar weakness has been a result of a flattening yield curve. As reported in MarketWatch today, Craig Elam said, “The flattening of the yield curve has triggered concerns that investors are possibly pricing in a slowing of the economy or even a recession. If yields on long-term U.S. debt don’t rise or even fall as the Fed raises interest rates, it could fuel fears of an impending recession, which could prove supportive for gold.”

With only one trading day left in the year, it is likely that gold will hold onto the price gains achieved this month. However, it must be noted that these gains have accumulated during a period of light volume and liquidity, which is a direct result of the holiday season.

Some analysts are still cautioning that the last trading day could result in selling pressure. In an interview with Jim Wyckoff of Kitco news, George Gero, the managing director for RBC wealth management, said, “Anything can happen in these quiet markets so you need to be careful. A surprise headline can change everything in a minute.”

Although it is a distinct possibility that tomorrow’s trading activity could result in selling pressure, on a technical basis this outcome has a low probability of occurrence. Our research indicates that it is more likely that we will see follow-through buying occur on the last trading day of 2017.

Wishing you as always, good trading,