Gold Continues to Show Strength and Price Resilience

Given that this recent correction is a reflection of gold prices surging $130, a very respectable rally, the price recovery over the last couple of trading days is clearly an indication of the resilience of current gold pricing and demand for the precious metal.

This rally began in the middle of November last year when gold was priced at $1200, up until January 31st when prices hit an apex at $1330. This week’s recovery is a clear indication that the correction which began at the end of January could be quickly coming to a conclusion.

As reported by Anna Golubova in Kitco News today, Jasper Lawler, head of research at London capital group said, “Gold is in a nice uptrend and it looks like we are done with what looked like a fairly natural pullback. One big caveat is that in this run-up, the market has been overbought. But the uptrend remains intact. For the time being, the focus seems to be on the global growth outlook.” 

Most importantly it is an indication that market sentiment continues to focus upon fundamentals on multiple levels. There is concern that the current trade war between the United States and China is no closer to a resolution than in past weeks. In fact, with the deadline quickly approaching in which the United States will ratchet up both the percentage of tariffs, as well as the items being taxed genuine concern has moved to a new high.

There is also major concern over the upcoming deadline on February 15th, in which there is a possibility that another government shutdown could occur if Congress fails to pass legislation.

Multiple hotspots continue to fuel support for the safe haven asset, with the crisis in Venezuela at the forefront of those concerns.

Add to this a much more dovish demeanor by the Federal Reserve and you have several events that have been highly supportive of gold pricing.

One interesting facet of recent price action in gold has been that recent gains have been in tandem with dollar strength. For the last seven trading days, (since January 31st) we have seen the dollar index gaine value for each consecutive trading day. Considering that the low at the end of January was at 94.88, and currently the dollar index is at 96.41, the dollar has gained over 1.5% in value. This makes recent gains in gold even more impressive.

As we spoke about over the last few days recent action in gold pricing is an indication not only of the resilience and desire for market participants to actively acquire and trade the safe haven asset, but more importantly a real indication that we could see pricing move much higher.

Wishing you as always, good trading,