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Despite Headwinds, Gold Will Bounce Back

Mar. 02, 2018 1:52 PM ETGLD, IAU, PHYS, SGOL, GTU, OUNZ, BAR, QGLDX, PHYS:CA6 Comments
Clif Droke profile picture
Clif Droke


  • Gold still under short-term pressure as stock market weakness weighs.
  • Once panic mentality recedes, however, gold should bottom.
  • Yellow metal stands to benefit from increasing fear factors.

After breaking its pivotal short-term support earlier this week, gold and the leading gold ETFs showed additional weakness on Thursday as investors' concerns over President Trump's latest trade policy plans created ripple throughout the financial market. As I'll emphasize in today's commentary, however, this doesn't necessarily mean gold's near-term fate has been sealed. Rather, the odds still favor both gold and gold mining stocks coming out of this latest malaise with a new found vigor resulting, ironically, from the very same investor fears which created it.

Gold was decisively lower on Thursday in the wake of a sell-off in the U.S. equity market. Gold prices declined by an average about 1% and hit two-month lows during the session. However, the gold ETF I track in this report bounced off session lows after Federal Reserve Chair Jerome Powell told the Senate Banking Committee the Fed didn't see evidence of a strong advance in wages, thus mitigating investors' recent concerns. Meanwhile, gold and silver mining stock prices managed to rally on Thursday and were among the only stocks to do so in a market characterized by across-the-board selling pressure.

The financial market plummeted after President Trump said he would impose high tariffs on imports of steel and aluminum despite the displeasure of his economic advisors. Trump said he would formally sign the trade measures next week and said they would be in effect "for a long period of time," according to the New York Times.

U.S. Treasury yields fell 2.23% on Thursday, which put some downward pressure on the dollar index. While the gold futures price was essentially unchanged, the iShares Gold Trust (IAU), which I use as a preferred trading vehicle and proxy for gold, declined 0.32% after seeing an even steeper intraday move as mentioned previously. Additionally, a strengthening U.S. dollar in the last

This article was written by

Clif Droke profile picture
Clif Droke is an equity research analyst and writer for Cabot Wealth Network. He has covered equities and commodities, specializing in gold, since 1997 and is the editor of the Cabot SX Gold & Metals Advisor.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)

fishfryer profile picture
The difficult level to breach is $1400. Be careful as you approach a few percent of this number.
If the tariff tandrum hadn't happened gold would be <1300 already and on its way to <1200.
Shoulda woulda coulda.

In the end a cycle is a cycle and no one knows when it will start/end. The news are just expressions of that cycle change.
badford's IRA profile picture
Ha, Ha, Ha .... LOL! You always crack me up with silly reasons why gold should go down! Cheers! :>) Hope you weren't short!
badford's IRA profile picture
It is really all about fear and sentiment!
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