APR 19, 2018
The tightly coiled gold price chart continues to coincide with more and more macro factors, from inflation to a weaker USD to geopolitical concerns to trade wars.
Investors are well advised to keep a close eye on the $1,350-$1,370 range; breaking out of this historically powerful overhead resistance band shows an upside chart gap all the way clear to $1,700+.
The second quarter expects to see another gold rally pushed by strong physical demand and the weaker US dollar, according to Boris Mikanikrezai, precious and base metals strategist at Metal Bulletin.
“The resilience of gold prices in spite of the substantial wave of speculative selling since mid-March (~71 tons, corresponding to a 17 percent drop in net long spec positions) is encouraging insofar as it suggests the presence of buying pressure elsewhere in the market, e.g. physical demand,” the analyst wrote in his weekly report for Seeking Alpha.
Inflation is seen as the second driver pushing gold higher, with an expansionary path projected to move further, boosted by strong oil and a tight labor market. The third boosting element for the yellow metal is the US deficit rising due to this year’s fiscal stimulus.
According to the analyst, the three listed factors will continue to affect the greenback and boost gold prices.
Gold bulls shouldn’t be depressed by the commodity’s temporary inability to break above its current trading range, he says, stressing that investors are commonly wary due to geopolitical risks, such as the recent tension between the US and China over trade and conflicts in the Middle East.
“Should the situation continue to deteriorate, investors could be forced to price more accurately this geopolitical risk. This would exert even more downward pressure on the dollar and US real rates,” Mikanikrezai says.
ORIGINAL SOURCE: Gold bullion to rally on weaker dollar, rising US inflation & deficit – analyst at RT on 4/18/18