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Gold Continues to Show Strength and Price Resilience

Commentaries & Views

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 yellow metal.

This rally began in the middle of November last year when gold was priced at $1,200, up until January 31 when gold prices hit an apex at $1,330. This week’s price recovery is clearly an 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 fundamental concerns 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 higher level.

There is also major concern about 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 and Venezuela certainly at the forefront of those concerns.

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

One interesting facet of recent price action in gold has been the fact that recent gains have been in tandem with the dollar strength. For the last seven trading days, since January 31st, we have seen the dollar index gained 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 dollars gained over a full 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 gold pricing move much higher.

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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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