Gold’s Rally Continues, Marking a New Milestone

Gold prices finished strongly higher, concluding the month with respectable gains on the day, month, and year. Reaching a new record high for the year, gold prices touched 1332. However, this new record high was to be short-lived as traders quickly pushed prices lower temporarily.

Trading under moderate pressure yesterday and in the early morning hours, gold prices dipped to a low of 1302 before recovering. The recovery was most impressive in that today’s trading range amounted to a $26 swing between the high and low of the day.

As of 4 o’clock EDT, gold futures (December 2017 contract) are trading up $13.50 at $1327.60, resulting in a 1% gain on the day. The collective gains for the month of August are a respectable 4%. Gold prices have now appreciated by roughly 12% this year alone.

Spot gold is also trading sharply higher, currently fixed at $1322.40, with a net gain of $14.30 on the day. This gain is primarily composed of investors and traders bidding up the precious yellow metal, with a small percentage of today’s gains attributable to a weakening U.S. dollar. According to the Kitco Gold Index (KGX), a weak U.S. dollar contributed $2.90 in value, with the remaining gains of $11.40 directly attributable to buying.

I believe that traders understand that even within the volatility intrinsic in gold pricing, that the underlying fundamental factors which have been responsible for driving prices higher continue to be relevant and continue to lead many investors to accumulate or invest in safe haven assets such as gold.

It is highly probable that the U.S. dollar will continue to fall. It is equally probable that the current geopolitical crisis with North Korea will not disappear on its own. It is also very likely that the debt ceiling, which comes to a head at the end of September, could create some short-term political chaos and turmoil.

Traders and investors witnessed gold prices in a drastic corrective stage as prices plunged from $1900 to $1040. This period was characterized on a technical basis as a series of lower lows and lower highs, all the way through this dramatic price decline.

However, since the beginning of 2016, gold prices have begun to stage a fairly significant rally and can be characterized as a series of higher highs and higher lows, as prices have now broken through $1300 per ounce. A move to 1373 would mean that gold prices have recovered by 38% from the lows seen at the beginning of 2016 when compared to the record high of $1900. As such, there is technically more upside potential that gold prices could trade to and a high probability that the current rally in gold will continue.

Wishing you as always, good trading,