6 Reasons Why Gold Is Headed Higher In 2018
(Kitco News) - Following are six elements working in favor of the gold market bulls and that should continue to support upward price movement in the precious metal.
Rising Government Bond Yields. A feature in the marketplace this week is rising world government bond yields (falling prices). This helped to hold back gains in global stock markets. Bloomberg news published a story Wednesday about the Chinese government possibly re-evaluating and reducing its purchases of U.S. Treasury securities. However, Chinese officials debunked that story Thursday. China is a massive holder of U.S. Treasuries. There have been recent proclamations from some veteran financial market analysts that the long-term bull market runs in U.S. Treasuries are over. This suggests rising interest rates and rising inflation. While the tighter monetary policies that generally come with rising inflation have been bearish for the metals markets, per recent history, longer-term history actually shows that hard assets benefit from rising inflation. Times of problematic inflation see the investing public generally opt for hard assets, including precious metals, over paper assets. The next shoe to drop in this scenario of rising inflation will be a major top being put in the U.S. stock market.
U.S. Treasury Bonds: The weekly continuation chart for nearby T-Bond futures shows prices this week dropped to a nearly one-year low. See, too, that prices are way down from the 2016 high. A drop below chart support at the 2017 low, seen on the chart, would produce major chart damage to suggest much more downside price pressure in the coming months.
U.S. Treasury Notes: The weekly T-Note futures chart shows major technical damage has already been inflicted, as prices this week fell to a 6.5-year low. The serious chart damage suggests more downside price pressure in T-Notes in the coming months. (Higher yields).
Technically Bullish Euro Currency: The weekly Euro currency futures chart shows prices in a longer-term uptrend and just recently hitting a three-year high. Importantly, the price action of the past couple weeks has seen the Euro currency produce a bullish upside “breakout” from a trading range, to suggest another leg up in prices in the coming weeks, or longer.
Bearish U.S. Dollar Index: The USDX is a basket of six major world currencies stacked up against the greenback. See on the weekly chart that the USDX is in a longer-term downtrend. A drop in prices below chart support the 2017 low, seen on the chart, would produce major longer-term technical damage to suggest another leg down in the USDX in the coming months.
S&P 500 Looking Toppy: New record highs keep rolling in for the U.S. stock indexes, amid them being in major long-term price uptrends. However, the weekly continuation chart for nearby S&P 500 futures does show bearish divergence with the Relative Strength Index (RSI). The RSI moved to a new high in early December and then backed off, while at the same time the S&P index moved on to new highs. This is bearish divergence with a technical indicator and is a technical clue a market is close to a major top.
Nymex Crude Oil Market is On Fire: The raw commodity sector leader, the oil market, hit a three-year high this week and has also recently punched above several stiff longer-term chart resistance layers. This suggests more upside for oil prices, with the next major upside technical objective being psychological resistance at $70.00 a barrel. It will take a drop below solid longer-term chart support at $55.00 to produce some serious longer-term technical damage.
Gold Charts are Bullish: The yellow metal sees prices are in a longer-term uptrend as seen on the weekly chart. The recent rally in prices has given the bulls some fresh technical momentum. However, prices will have to push above stiff chart resistance at the 2017 high, seen on the chart, to gain solid power to then suggest much bigger price gains are forthcoming.
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