Gold Trades to the Highest Price Since 2016

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Gold futures (June 2018 Comex contract) gained $6.70 today and is currently trading at $1,348.60 per ounce. Gold closed higher on four of the five trading days this week, resulting in an $11 gain. This marks the second consecutive week of higher pricing for gold.

However, it is the high achieved this week that is the most significant event. On Wednesday, gold futures traded to an intraday high of $1,369.30. This price point is well above the three former highs that were achieved in September of last year and during the first quarter of this year.

This marks the fourth time since September 2017 that gold prices have broken above $1,350 per ounce. Prior to that, these rallies were unable to sustain a price point of even $1,300.

What makes Wednesday’s high so significant is the fact that you have to go back to August 2016 to find a time in which gold traded at this price level. The highs achieved during the 2016 rally took gold pricing just above $1,375 per ounce.

More importantly, the highs achieved during that rally were the first occurrence of a higher high since the multiyear correction that began in the middle of 2011. It is for that reason that this price point is so significant now.

Since the end of 2016, gold has traded with a series of higher lows on multiple occasions. However, each rally following the conclusion of a correction was unable to trade to a higher high. Wednesday’s high at $1,369.30 was, in fact, the closest gold prices have come close to the former high.

It is the geopolitical events that have fueled this current rally and could ultimately take gold above the high achieved in 2016.

On a technical basis, that would confirm that the lows achieved at the end of 2015 were the absolute conclusion of the multiyear correction. That is why this week’s high is so significant.

Currently, gold is once again becoming a safe haven-asset reacting to the strong possibility that the United States will initiate a military response to the recent chemical weapon use in Syria.

The current crisis is much different from the response President Trump took after a chemical weapon attack by Syria last year. The Russians responded to a potential U.S. attack by warning that missiles fired into Syria would be shot down and their launch sites targeted. It is the last part of that statement that is so worrisome.

Obviously, a retaliatory strike by Russia targeting either U.S. carriers or airplanes could be catastrophic and devastating globally. It is for that reason that the United States is working with allies to create a unified plan for a military strike.

Whatever the outcome of this current crisis, I fear that it will get worse before it gets better, which would be bullish for gold. Addressing that fact, Daniela Cambone, Editor in Chief of Kitco News, made the most appropriate comment in her commentary today titled “Be Careful What You Wish For.”

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer