Why the Price of Gold’s Rebound This Week Could Continue Through 2017

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After falling 6.8% from the June 6 peak of $1,298, the price of goldseemed to have finally hit a bottom on Friday, July 7.

That was when gold prices fell 1.1% to $1,210 – the lowest since March 15. However, the metal has rebounded 1.5% since then to today’s gold price of $1,230.

This week’s gains mostly came from renewed weakness in the U.S. dollar. After all, the U.S. Dollar Index (DXY) has declined from 96 basis points on July 7 to 95.27 today.

And the dollar’s weakness is no real surprise, thanks to the U.S. Federal Reserve.

Although the Fed has been “talking tough” about raising rates and unwinding their $4.5 trillion balance sheet, the reality could be something else entirely.

Inflation is falling below the Fed’s 2% threshold again, with new data showing a slowdown in June to 1.6%. That’s down from 1.9% in May and a five-year high of 2.7% in February. And in Fed Chair Janet Yellen’s Congressional testimony this week, she admitted the global inflation slowdown could call for an “adjustment” to the central bank’s policy.

In other words, interest rates may not rise as fast as we’ve been led to believe, and that could continue pressuring the U.S. dollar while boosting the gold price in 2017.

I’ll show you exactly how high I see gold heading this year, right after we look at the metal’s rebound this past week…

Gold Prices Rose 1.5% This Week from a Four-Month Low

After hitting a potential bottom of $1,210 on Friday, July 7, the gold price opened lower, near $1,206, on Monday, July 10. Although the DXY rose above 96 in the morning, it leveled off throughout the day, allowing gold to steady at a higher price. The price of gold ended the day at $1,214 for a slight gain of 0.3%.

Tuesday was similar, with the price of gold falling in the morning before rebounding later in the session. It opened lower at $1,210 that morning, but moved higher after the DXY dropped suddenly from 96.18 to 95.68. This pushed the metal to $1,217 by the close, marking a 0.2% rise for the session.

Here’s the DXY’s action over the last five trading days…

price of gold

Gold built more bullish momentum on Wednesday. It opened flat at $1,217 but traded up in the $1,220 range for most of the day. Prices eventually settled 0.2% higher at $1,220.

However, Thursday saw some profit-taking from gold investors as the gold price fell back to $1,216 in mid-morning trading. It edged higher to $1,218 by the close, but still saw a 0.2% loss on the day.

Trending: 7 Ways to Tell If Your Gold Is Real

But the gold price today is making a strong comeback, up 1% to $1,230. That puts the metal on track for a weekly gain of 1.5%.

Gold’s rebound this week makes last Friday’s four-month low look like a true bottom for prices. If that’s the case, I could see the gold price running much higher through the rest of the year.

Here’s my bullish gold price forecast for the rest of 2017…

Price of Gold Could Reach These Bold Targets by the End of Q3 2017

To understand why gold prices could rally from here, we need to look at their trading patterns so far in 2017.

While I hesitate to say the gold correction is completely over, the action in the last few days does look promising…

price of gold in 2017

If the recent low at $1,210 holds, it will not only be above March’s $1,200 bottom, but also well above the December 2016 low near $1,135. In fact, $1,210 is $75 – or 6.6% – above that December 2016 low.

Looking at the Relative Strength Index – which measures the change and speed of the price of gold – it has rebounded from the recent low of 35 to 35.92. This could confirm an emerging path higher for the gold price.

Additionally, demand for physical gold is strengthening, especially in the world’s largest gold-importing country. Reuters just reported that India’s gold imports for June reached 75 tons – more than triple the 22.7 tons imported in June 2016.

Ostensibly, the reason for the increase was a new gold sales tax being implemented in the country, which caused a rush of buying. Yet, the entire first half of 2017 reached 521 tons of gold imported in India, which was more than the 2016 total of 510 tons.

As for the seasonal aspect of gold prices, gold has typically soared by 7% between mid-June and September during the positive years of the current bull market going back to 2001.

Given that we could well be right in that sweet spot now, even a small gain of 0.4% from the current $1,230 level could pull gold up to its 200-day moving average at $1,235. Beyond that, my next target is the 50-day moving average of $1,250 – up 1.6% from today’s price.

If gold can muster the average summer rally of 7% like it has in the positive years of this bull market, then a 5.7% gain to $1,300 may not be out of the question before the fall.

The Bottom Line: The 1.5% rebound in the price of gold this week indicates that the metal already bottomed on July 7. That means gold is set up to rebound throughout the rest of the year. I see the metal reaching $1,300 per ounce before September 2017 – up 5.7% from today’s $1,230 price.

 

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