The gold price has remained flat over the last two weeks, with daily movement last week mostly alternating between gains and losses. However, the metal eventually ended the week with a small 0.2% loss.
U.S. President Donald Trump announcing on Nov. 2 that Jerome “Jay” Powell would be the next Federal Reserve chair wasn’t even enough to boost gold prices. Perhaps it’s because Powell – widely known as neither hawkish nor dovish when it comes to interest rates – likely won’t do anything unexpected in his new position.
For now, that’s kept the stock market humming higher, with the Dow Jones up 0.5% since Thursday’s announcement. Another factor pushing stocks up has been the expected Fed rate hike in December, which economists predict has a 96.7% chance of happening.
However, I don’t expect a December rate hike to happen.
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But the high odds of a bump to the 1.25% to 1.5% range have still kept the U.S. dollar strong. The U.S. Dollar Index (DXY) – which measures the dollar against the euro, yen, and several other currencies – is up from 93.80 to 94.77 over the last month.
I don’t think the dollar’s rally is over yet, so the price of gold’s gains will stay limited for now. But selling exhaustion may be settling in, and we could be gearing up for a surprise rally before the end of the year thanks to a seasonal push.
Today, I’m going to show you my bullish target for the gold price by the end of December 2017. First, let’s recap the metal’s performance last week…
Gold Price Posts a 0.2% Decline Last Week (Oct. 27 – Nov. 3)
After closing at $1,272 on Friday, Oct. 27, gold prices opened lower, at $1,270, on Monday, Oct. 30. But the DXY weakened over the course of the session, from 94.92 to 94.56, which bumped the metal higher. It eventually closed the day at $1,278 for a 0.5% gain.
The gold price erased the previous session’s gain on Tuesday despite the dollar hardly moving. The DXY traded around 94.56 and eventually ended the session slightly lower, at 94.55. That wasn’t enough for gold traders, as prices fell back to $1,271 by the close for a 0.5% loss. With that loss, gold posted a monthly loss of 1.1% in October.
For reference, here’s a look at the DXY’s movement last week…
On Wednesday, Nov. 1, both the dollar and price of gold managed to bounce higher, with the DXY rallying toward 94.80 by the close. This didn’t deter gold buyers, who stepped in and boosted prices 0.5% to $1,277 by the close.
The metal had a mostly uneventful day on Thursday, as both gold prices and the DXY traded in a narrow range. Despite falling to 94.50 at the open, the index fluctuated between 94.60 and 94.75 most of the day. This capped gold’s movement, which ended the day just 0.08% higher, at $1,278.
Renewed interest in the dollar on Friday, following Jay Powell’s Fed chair announcement, boosted the DXY to test the 95 level. That inevitably weighed on the gold price, which dropped 0.7% to $1,269 by the close. With that, gold logged a weekly loss of 0.2% from Friday, Oct. 27.
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But the price of gold today (Monday, Nov. 6) is back up to its highest level in more than two weeks. It’s trading up 1.1% to $1,283 – the highest since Oct. 19.
I remain cautiously bullish on gold as we head toward the end of the year. This is mostly due to stocks charging higher, which means they may be due for a sobering correction. Also, the gold price and gold stocks normally hit seasonal lows in late October before rallying higher.
Gold prices could still push much higher by the end of December, even if we see more weakness over the next few weeks.
Here’s my specific gold price prediction for the rest of 2017…
This Is How High the Gold Price Could Reach Before 2018
As I’ve said in past columns, the dollar continues to define gold’s narrative.
But the dollar’s rally from 93.08 to 94.75 so far in Q4 hasn’t dragged gold down more than 0.2%…
A small move lower, perhaps to the 200-day moving average of $1,261 (indicated by the green line above), may be the bottom that sets the stage for a test of $1,310.
At the same time, gold stocks – indicated by the Gold Bugs Index below, which tracks gold mining companies – look like they may be setting themselves up for a similar rebound…
I predict both the Gold Bugs Index and gold prices to test their September highs. Those would be the $1,351 level for gold prices and the 219.61 level for the Gold Bugs Index, marking respective gains of 5.3% and 16.1%.
In other words, these trends indicate we’re set for a strong finish to 2017 for the gold sector.
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