Not only did the gold price manage to stay above the $1,300 resistance level last week, but the metal surely and steadily climbed even higher. From Friday, Sept. 1, to Friday, Sept. 8, the price of gold gained 1.6% to $1,351.
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Gold was clearly buoyed by the U.S. dollar’s plunge to a nearly three-year low. The U.S. Dollar Index (DXY) – which measures the greenback against other currencies like the yen and the euro – dropped from 92.81 to 91.33 last week. That was the lowest since December 2014.
But North Korea’s testing of a hydrogen bomb – considered the country’s most powerful to date – on Sunday, Sept. 3, sent gold prices higher. On Tuesday, Sept. 5, the price of gold jumped 1.1% to $1,345.
Despite falling since then to $1,339 today (Monday, Sept. 11), gold is now up 16.2% in 2017, easily beating the S&P 500’s 10.9% gain since then.
Some indicators are starting to place the metal in overbought territory. While this could lead to a brief dip, I remain bullish on gold in the medium and longer terms. Today, I’m going to share with you my bullish gold price target for the end of 2017.
First, let’s look at gold’s 1.6% rise last week…
Gold Price Gains 1.6% Last Week (Sept. 1-8)
After settling at $1,330 on Friday, Sept. 1, the metal opened higher following Labor Day and North Korea’s hydrogen bomb test. The news urged investors to sell their stocks and move into safe-haven gold on Tuesday, dragging the Dow Jones 1% on the day and boosting the gold price 1.1% to $1,345.
On Wednesday, Sept. 6, the price of gold opened lower at $1,339. It moved sideways at that level throughout the day as the DXY was also mostly flat. Gold prices closed the session at the opening level of $1,339 – 0.4% down from Tuesday’s close.
Here’s a look at the DXY’s performance last week…
But gold prices rebounded on Thursday, as the dollar sold off from 92.29 to 91.66. Gold climbed steadily throughout the session to eventually settle at $1,350 for a 0.8% gain.
Friday was marked by record closes for both the gold price and DXY…
After opening lower, the dollar stayed below the previous close the entire day and eventually settled at 91.33 – the lowest since December 2014.
Meanwhile, the price of gold gained 0.1% on the day to close at a one-year high of $1,351. With that, gold logged a weekly gain of 1.6%.
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The gold price today is down 0.9%, to $1,339, from Friday’s one-year high. This is due to a 25 basis-point rebound in the DXY, which hovers near 91.72 right now.
While we can never tell what North Korea will do next, one factor that will continue to be fundamentally important for gold is the dollar. With the greenback down near a three-year low, the dollar’s movement from now until the end of the year will play a large role in my gold price forecast for the rest of 2017.
Here’s where I see gold heading in the near and long term…
These Are My 2017 Gold Price Targets
If we look at the dollar’s decline this year, I think we can better gauge where gold prices are heading next.
The DXY peaked at 103 at the start of the year and has since fallen to 91.72, which is roughly 11%. That’s a huge move for any currency over just an eight-month span.
But for the world’s de facto reserve currency, it’s huge…
Not only had the MACD momentum indicator moved upward in August as the DXY fell, but recent Commitment of Traders (COT) reports show speculators’ positions reaching near extreme bearish levels. The report from the week ended Aug. 25 showed traders and hedge funds were their most bearish on the dollar in three years.
Of course, this is a contrarian signal, indicating we may be near a dead cat bounce for the dollar. This is when an asset that’s been declining for an extended period of time sees a brief rebound before continuing its fall.
If it’s a dead cat bounce, the DXY could be boosted back up to the 94 or 95 levels, likely weighing on gold prices in the near term…
And gold’s strong rally of the past month has put its relative strength index (RSI) and MACD (highlighted yellow above) into potentially overbought territory. So I still see a good chance for gold to pull back in the near term, possibly testing the $1,300 level in the next month or so. Even if that happens, it would be just a 2.9% decline from today’s price of $1,339.
Finally, if we look at gold’s performance across major currencies since the start of this year, the results are impressive…
Since Jan. 1, gold is up when priced in the U.S. dollar, Canadian dollar, euro, Swiss franc, and Japanese yen. This kind of international bullish price action is a sign of a major bull market beginning.
I still think gold has much, much higher to go. I expect to see a serious run to $1,400 before the end of 2017. That would be a gain of 4.6% from today’s price.
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