Gold Prices Regain $1,300/Oz, Headed For 13% Gain In 2017
(Kitco News) - Gold futures continued their recent uptrend to a fresh one-month high just above $1,300 an ounce Friday as the U.S. dollar remained on the defensive, leaving the metal on track for a 13% gain for the year.
Volume remained thin on the final trading day of 2017, with many traders away from their work stations in the week between Christmas and New Year’s Day. Asian trade has closed for the year and the London market is only open for half of Friday, traders said.
“It’s all about the dollar,” said George Gero, managing director with RBC Wealth Management.
The euro hit a three-month high of $1.2000. Traders often buy gold as an alternative currency when the dollar weakens, plus a soft dollar makes all commodities cheaper in other currencies, thereby potentially helping global demand.
Based on a futures continuation chart, gold was up 13% for the year, while silver was up 6% for the same period. Meanwhile, the U.S. dollar index – which measures how the greenback performs against a basket of currencies -- was down roughly 10% for the year.
Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, also attributed much of gold’s recent gains to the softer dollar. Additionally, he said, the metal is drawing support from geopolitical uncertainties involving a number of regions around the globe.
“People don’t want to go home short,” he said, referring to bearish positions.
Another trader expressed the same sentiment, citing uncertainty about the U.S. administration’s foreign policy and also commenting that some investors are starting to worry about the U.S. debt after passage of a tax-cut plan.
Nabavi added, however, that the moves are occurring in thin liquidity, in which small trades can cause bigger moves than usual.
Gero pointed out that deferred futures contract months, which are farther out than the most-active February futures, had already hit $1,300 an ounce going into Friday’s session. “Asset allocators were already prepared for $1,300,” he said.
He added that with the soft dollar, some “window dressing” is occurring in gold. This is when fund managers buy certain assets that they think will look good to clients, typically before the end of a quarter or year.
Gold has also generated technical momentum in recent sessions, after the February futures broke above a number of longer-term moving averages, including the 50-day at $1,278.50, the 200-day at $1,279 and the 100-day at $1,292.50.