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Gold Closes Above Thursday’s Steep Price Advance

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Gold prices recovered the incremental price decline on Friday and are now trading above Thursday's closing price. On Thursday of last week, gold prices rose from the opening price of $1,197 to $1,230 by the closing bell.

On Friday, gold prices had a fractional decline with the most active December Comex contract closing at $1,222 per ounce. Even with Friday’s small daily decline, gold futures had a solid weekly performance resulting in a $15 price advance per ounce of gold.

Last week’s strong finish was a direct result of a major selloff in U.S. and global equities on Wednesday and Thursday as well as U.S. dollar weakness. Both of these factors contributed to a renewed and favorable market sentiment due to the safe-haven appeal of gold.

One of the more impressive aspects of last week’s stellar price advance was the fact that gold pricing closed above the major resistance area at $1,218 to $1,220. This price point is the 0.618% retracement. This price point has been a strong level of resistance throughout the middle of August and the entire month of September.

After gold broke below that key support level during the second week of August, prices traded to the lowest value of 2018 after trading on an intraday basis to $1,167 per ounce.

From August 13 to August 28, gold rallied from the yearly lows and traded to a high of $1,217 before prices began to retreat again, solidifying this price point as a major resistance area. $1,220 per ounce would then become a strong level of resistance throughout September and October until gold surged and closed above $1,220 on Thursday of last week.

On both Friday and today, gold traded above $1,219/$1,220, confirming that this level has now become price support rather than resistance. More impressive is the fact that today’s strong finish has resulted in gold prices trading to their highest price point since July.

U.S. Deficit Rises To $779 Billion

According to Reuters, the U.S. federal government closed the 2018 fiscal year $779 billion in the red as tax cuts hit revenues and the government paid more to service a growing national debt, based upon the Treasury Department data released on Monday.

Rising interest rates seem to be the primary factor responsible for the widening of the deficit, with increased military spending also widening the gap. Borrowing has increased over last year as the U.S. budget deficit increased by 113 billion, or 17% over the previous fiscal year.

We can certainly expect this widening budget deficit to add fuel to the recent bullish and safe-haven demeanor intrinsic to gold pricing.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer