Gold well-supported on safe-haven flows, lagging dollar

Increasing political and economic uncertainties under the new Trump Administration, coupled with a sliding US dollar since the beginning of the year, have led to a sharp rise in gold prices for more than a month.

  • Increasing political and economic uncertainties under the new Trump Administration, coupled with a sliding US dollar since the beginning of the year, have led to a sharp rise in gold prices for more than a month.
  • Since late December, gold has risen from its long-term lows around $1125 up to its current position in the mid-$1230’s.
  • Demand for the perceived safety of gold has risen significantly as US President Trump’s trade and foreign relations agendas have been met with substantial opposition, confusion, and overall concern.
  • Worries have also arisen with regard to Trump’s ability to push forward his promised fiscal stimulus plans in a timely manner.
  • Trump and some of his key advisors have recently stated that the US dollar is too strong, while also attacking other countries for allegedly keeping their currencies weak in order to gain an advantage in trade, including Germany, China, and Japan.
  • These concerns have simultaneously helped pressure the US dollar while boosting dollar-denominated gold.
  • Last week’s mixed US jobs report showed a much better-than-expected number of jobs added in January, but lower-than-expected wage growth, a key measure of inflation. This data lowered expectations of a near-term interest rate hike by the Federal Reserve, thereby further supporting short-term demand for non-interest-bearing gold.
  • Going forward, uncertainties boosting safe-haven flows are likely to increase further as the Trump Administration extends its hardline protectionist stance, and as Europe faces mounting political risks.
  • From a price perspective, gold continues to climb towards major resistance around the $1250 price level. This level is also the 50% retracement of the sharp downtrend from July to December of last year. Technically, much will depend on how the price of gold reacts around that key level. A major, sustained breakout above $1250 could signal heightened risk aversion in the markets, potentially opening the way towards a short-term $1300 resistance target.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account