The gold price fell last week, continuing a correction that’s now nearly one month old. The metal dropped 0.7% from Friday, Sept. 29, to Friday, Oct. 6.
The recent correction, which began on Sept. 12, continues to frustrate the gold bulls. After pushing all the way up to a one-year high of $1,351 on Sept. 12, gold prices were poised to fall from there.
In fact, gold’s climb above $1,300 on Sept. 25 and back below that price the following session, as I discussed last week, caused even more sentiment damage.
Given the price action since then, it’s looking like that might not last…
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By Friday, Oct. 6, the price of gold had dipped to “test” an intraday low of $1,260, just as I had predicted. But that lasted little more than minutes, as bargain hunters stepped in to boost the price to $1,275 by the close.
Have we now seen gold’s interim bottom? I think it’s set for a rebound from here, which is why I’m going to share with you my gold price targets for the rest of 2017.
First, let’s examine last week’s 0.8% decline and how it plays into the broader gold picture…
Gold Prices Lose 0.7% Last Week (Sept. 29-Oct. 6)
After closing at $1,285 on Friday, Sept. 29, the price of gold trended lower throughout the day on Monday, Oct. 2. This was a response to the rising U.S. Dollar Index (DXY), which measures the dollar’s value against other prominent currencies like the yen and euro. As the DXY climbed from 93.08 on Friday to 93.56 by the close Monday, gold fell 0.7% on the day to settle at $1,276.
More overnight weakness was in the cards, but by Tuesday’s open gold had steadied above the $1,270 level. The dollar moved mostly sideways on the day at 93.60, but this still caused the metal to post a daily loss. The gold price settled at $1,275 for a slight 0.07% decline.
On Wednesday, Oct. 4, gossip surrounding who would succeed Federal Reserve Chair Janet Yellen drove the dollar and gold price action. Talk of Jerome “Jay” Powell – considered more dovish than other front-runner Kevin Warsh – succeeding Yellen dragged the dollar lower, from 93.57 to 93.46. The price of gold responded positively, jumping 0.2% to close the session at $1,277.
Here’s a look at the DXY’s action last week…
Although they opened Thursday flat near $1,276, gold prices lost some ground as the DXY climbed from 93.50 to 94. This was enough to drag the metal lower, ultimately ending the session 0.3% lower at $1,273.
Friday was a very interesting day from a technical trading perspective. Early that morning, the DXY surged up to 94.25, tanking gold down to $1,260. But the dollar reversed back to 93.80 by late afternoon, which sent the price of gold up to $1,275 by the close. That marked a 0.2% gain on the day but a 0.7% loss on the week.
Urgent: Executive Editor Bill Patalon just saw something on his precious metals charts he’s only seen twice in 20 years. He calls it the “Halley’s Comet of investing” – and it could lead to windfall profits. Read more…
But the gold price today (Monday, Oct. 9) is starting the new week on a strong note. It’s currently up 0.6% and trading at $1,283 – the highest since Sept. 29.
As I’ve said before, the dollar’s recent rally has continued to control how gold prices move. The greenback’s rise above the 94 level last Thursday was the highest since July 25. This marked negative sentiment for gold traders, who likely saw the two-month high as a sign of a continued rally for the dollar.
However, I think the dollar is due for a rest at this juncture, which would be bullish for the price of gold through the rest of the year.
Here are my bullish gold price targets for the last quarter of 2017…
My Gold Price Forecast for the Rest of 2017
After poking above the 94 level, the DXY has pulled back to 93.80. I believe that, after the dollar’s gains of the last month, it could now flatten.
That’s because it seems the DXY is encountering overhead resistance near that 94 level…
With that serving as the resistance level, the dollar could well consolidate near 94 for a while. And that would give gold a decent boost that would be likely to help gold stocks at the same time.
The gold price momentum indicators (highlighted below) offer further support…
The relative strength index (RSI) has flattened, but the moving average convergence divergence (MACD) indicator has yet to do so. If the dollar moves sideways from here, I’d expect the gold price to make a new run to at least its 50-day moving average, which right now is around $1,299.
If the DXY finally pushes above 94 and stays there, I’d expect a minor pullback in gold. But once it’s back above $1,300 in a sustained way, gold will see a breakout rally through the end of the year to the 2016 high of $1,373, and then to $1,400before January 2018.
As for gold stocks, we can look at the GDX/gold ratio (gold stocks/gold ratio) for some clues…
First, despite periodic dips, the ratio overall has been trending higher this year, meaning gold stocks are outperforming gold prices on average. Second, it has just come back down to test the support line, then bounced strongly, pushing through both its 50-day and 200-day moving averages with momentum indicators on its side.
With gold stocks looking poised to continue rallying, the ratio will continue higher as well. This is bullish not just for gold stocks but also for gold prices.
To recap, the dollar could be due for a minor consolidation, which should help gold. Once the DXY pushes above 94, expect a small pullback. A sustained push above $1,300 is likely to take gold to last year’s high of $1,373, then a run for $1,400 later this year.
Up Next: Rare Gold Anomaly
Money Morning Executive Editor Bill Patalon just caught something on his gold charts that he’s only seen twice in the past 20 years. A $13 billion gold anomaly he calls the “Halley’s Comet of investing.”
It’s very rare, and fleeting, and Bill sees things lining up perfectly to bring some very sizeable precious metal profits to well-positioned investors.
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