Well, the potential scenario I predicted last week about the price of gold appears to be playing out.
After closing at a peak of $1,278 on Wednesday, Aug. 2, gold prices have begun a small consolidation so far. Despite being on track for a flat performance this week, the metal is down 0.8% from that Wednesday high to $1,268 today.
But this is likely a good thing. After a robust rally that took the gold price from $1,210 on July 7 all the way to $1,278 on Wednesday, that three-week 5.6% gain was due for a rest.
My view is still that little attention is being paid to gold as the Dow Jones Industrial Average notches a fresh all-time high above 22,000.
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So even though the price of gold might take a little time to digest its 5.6% rally over the last three weeks, I expect the precious metal to deliver even more gains in the weeks ahead.
Let’s take a closer look at gold’s performance this past week. Then, I’ll show you just how high I see gold prices heading by the end of the year…
Price of Gold on Track for Flat Weekly Performance (July 28 – Aug. 4)
After settling at $1,268 on Friday, July 28, gold opened at the same price on Monday, July 31. It traded within a thin $2 range throughout the session and eventually closed at $1,267 for a small 0.1% loss.
Trading was equally choppy on Tuesday as gold prices opened lower at $1,266. Despite steady movement in the U.S. Dollar Index (DXY), gold climbed higher and ultimately closed at $1,273 for a 0.5% gain on the day.
Here’s a look at how the DXY has performed this past week…
On Wednesday, Aug. 2, both the gold price and DXY were volatile as the Dow Jones surged to record highs. The metal peaked at $1,272 as the DXY bottomed at 92.58, but both reversed course from there. The dollar’s push to 92.88 forced gold to settle 0.5% lower at $1,266.
Then on Thursday, gold prices hit a low in early morning trading near $1,262. But they managed to climb higher in the face of the DXY’s ability to hold above 93. Gold settled at $1,268 for a modest gain of 0.2%.
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And the gold price today (Friday, Aug. 4) is trading at the same levels as yesterday and a week ago. It’s trading flat at $1,268, putting it on track for a flat week after four consecutive weeks of gains.
As the price of gold closes out a week marked by volatile trading, investors want to know if the precious metal will maintain its long-term rebound from the July 7 low of $1,210.
I think that the metal will maintain that rebound this year, despite some possible consolidation in the near term.
Here’s my 2017 gold price prediction…
This Is Where Gold Prices Are Headed in 2017
As I said, I think a bit more consolidation is in store for near-term gold prices, and I think we can see that by looking at the dollar’s decline lately.
After peaking near 103 on Jan. 1, the DXY has since fallen to the very bottom of its three-year range between 92.7 and 103…
A quick look at the momentum indicators – the relative strength index (RSI) and moving average convergence divergence (MACD) – shows that selling momentum could be exhausted as they move to levels not seen since 2015.
Therefore, the dollar could be due for at least a modest dead cat bounce from here. I wouldn’t expect much strength, but maybe enough to pull the DXY up to 94 or 95.
That would likely weigh on gold prices, which we can see over the last six months in this chart here…
Although there’s no certainty, a dollar bounce could push gold back down to the $1,255 level, which is near the 50-day moving average of $1,253, where it’s seen resistance before. Right now, the RSI looks like it may have topped out, and the MACD may not be far behind, supporting the idea of possible weakness.
Following that buying opportunity, I’d expect to see the yellow metal make a new run for $1,300 before Labor Day weekend.
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