Gold Scores an Impressive First Quarter

It may be hard to believe, but the first quarter of 2017 is quickly coming to an end. With only a couple of days left in March, it seems likely that gold prices will score a solid gain in terms of their first quarter performance. Gold was trading at 1144 on January 2nd of this year, and as of today, we have gold futures trading at 1255, which is a net gain of $111 or .088 %. Assuming gold prices finish in this area on April 1st, the first quarter performance of the precious yellow metal is roughly 9%.

However, this is a little over half of the gains seen in the first quarter of last year (2016). At that time gold prices surged and gained approximately 16%. In fact, the first quarter of 2016 had the strongest quarterly performance in gold since 1986. However, more importantly, the first quarter of 2016 was the starting point of a key reversal in gold pricing.

It was during that time that gold prices recovered, trading at a higher high than the previous year. This was the first occurrence since 2011 of a higher yearly high as well as a higher yearly low than the prior year. This fact gave traders technical confirmation that a bottom in gold prices had formed, after losing almost 50% of its value from the 2011 high when gold traded at above $1900 per ounce.

Historically speaking, the first quarter of this year and last year have both resulted in solid positive gains. The final puzzle piece that market technicians are looking for is whether or not gold will trade to a higher high than last year’s high. If so, there will be strong technical evidence that an absolute bottom in gold pricing was achieved in December 2015, and the extended massive correction is over. Currently, 2017’s low is above the low which was achieved in 2016.

Uncertainty surrounding Brexit and a new American president coupled with an accommodative Fed have been supportive of gold pricing this year. Although first quarter performance is dwarfed when we compare it to the first quarter performance of last year, the 9% gain is absolutely respectable. More importantly is the fact that since gold began its most dramatic decline in history, the first quarter performance of last year and this year are strong, solid and indicate a real potential for gold prices to extend their gains throughout this calendar year.

Wishing you as always, good trading,