The Rally in Gold Continues as the Dollar Continues to Fall

Gold prices surged again this week, trading to a weekly high of 1362 last night. This marks the third consecutive week in which gold prices have closed remarkably higher. It also continues the dynamic rally which began during the week of July 10^th.

A combination of events which have resulted in a more favorable outlook for safe haven assets, such as gold, continue to be on the forefront of traders’ minds.

The current crisis continues to develop as North Korea continues to ramp up its nuclear weapons program. Even though there has been a pause in the escalation, many believe that it is simply the calm before the storm.

North Korea has repeatedly conveyed their steadfast determination to create a nuclear weapon that they can launch from a long-range ICBM. However, more alarming are their threats to utilize such a weapon on the United States. Reports have surfaced that North Korea is readying themselves for yet another missile test. Many believe this test will occur in conjunction with a major North Korean holiday later this month.

Recent action by Mario Draghi and the ECB has moved the Euro strongly higher as a trade against the U.S. dollar. That, combined with a low probability that the Federal Reserve will raise rates this year, has been responsible for part of the dollar’s dramatic selloff this year.

It is the U.S. dollar that continues to be in a dramatic free fall. The dollar closed 4/10 of a percent lower on the day with the index settling at 9127. This fall from grace has now resulted in over an 11% decline since its highs of 104 in December of last year.

Our technical studies indicate that there is more upside room for gold prices, which are now within striking distance of taking out last year’s highs at 1380. Gold futures have settled up $1.30 on the day at $1351.60.

Regardless of where this current rally ends, traders and investors are witnessing an upside surge in value. This has, quite frankly, been absent from the market for many years. The sad truth of the matter is the events which are the underlying causes of higher gold prices will most likely not resolve themselves on their own. As these issues are tackled and resolved, we can still look for gold to find solid support and move to higher pricing.

Wishing you as always, good trading,