Gold Prices in Recovery Mode

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Gold prices climbed for a third session in a row last Friday. This rise on the back of declining U.S. dollar and recent weakness in assets perceived as risky wasn’t enough to give the yellow metal a boost for the week.

August gold rose $7, or 0.6%, to settle at $1,256.40 an ounce, with futures down a dime from last Friday’s settlement, after posting losses in each of the past two weeks.

July silver gained 13.8 cents, or 0.8%, to $16.647 an ounce. For the week, silver lost a bit more than a penny.

Gold is consolidating from the recent drawback, but is still in a correction mode. The bottom of the current correction should be seen in the next week or two. Only after, a bigger climb should start.

August could be an ideal month to kick-start this new uptrend in gold prices, which could last till the end of the fall.

A softening dollar helped to give precious metals get a lift last Friday, with the ICE U.S. Dollar Index down 0.4%. Slack in the dollar can give commodities priced in the currency a boost, making them cheaper for buyers using weaker currencies.

Although the Federal Reserve last week lifted benchmark interest rates and communicated its intention to normalize monetary policy and shrink its $4.5 trillion balance sheet, gold prices have climbed. Higher rates can dull the demand for gold in favor of investments that do offer a yield and vice versa.

Precious metals have also benefited over the past week from haven bids, amid concerns about the impact of falling oil prices which have recently weighed on equity benchmarks.

Gold prices have been quite resilient to pullbacks this year, with higher and higher lows. Following the correction this month, the yellow metal is now due to move up. With some political uncertainty in the U.S., Brexit negotiations off to a rocky start and geopolitical tensions ratcheting up, gold has support for to break out above the $1,300 level.

Technically, the market appears vulnerable to a sell-off given the bounce off of last year’s low, which was a multi-year low, but it seems to have found support at $1,240.

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