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Gold's Near-Term Prospects Are Looking Up Again

Mar. 07, 2018 10:53 AM ETFXE, IAU, SLV, UUP2 Comments
Clif Droke profile picture
Clif Droke


  • Gold closes in on a confirmed immediate-term breakout signal.
  • This time around, silver is (thankfully) leading the way.
  • Dollar weakness, not safety buying, is the prime motivating factor.

After spending the last few weeks in a lackluster sideways trend, the gold price is finally showing signs of life again after last week's brief scare. Encouragingly, gold showed strength on Tuesday even despite a lifting of the "fear factor." As we'll discuss here, the fact that gold is rallying without a sustained fear component is even better for its intermediate-term prospects.

Gold prices rose more than 1 percent on Tuesday as the U.S. dollar index weakened after North Korea expressed a willingness to "denuclearize" and investors worried about aggressive U.S. trade policy. Gold and silver prices were both decisively higher for the day, thanks in part to a weakening dollar. Spot gold gained 1.1 percent to close at $1,334 on Tuesday, while April gold futures settled up $15.30, or 1.2 percent, at $1,335.

The dollar index hit a two-week low as traders bet on riskier currencies on the news that North and South Korea would hold their first summit in more than 10 years. North Korea's premier Kim Jong-un also expressed a willingness to negotiate with the U.S. in abandoning his country's nuclear weapons. Kim also said he would suspend all nuclear and missile tests while such talks were underway, according to news reports.

As discussed in the previous report, the single best thing that could happen to boost gold's prospects right now would be a weakening of the dollar's value, which would benefit gold's currency component. The PowerShares DB US Dollar Index Bullish Fund (UUP), which is an excellent dollar index proxy, closed slightly under its 15-day moving average on Tuesday in reflection of the weakness. A resumption of UUP's declining trend which temporarily terminated in February would lift the gold price out of its 7-week trading range and allow the metal to resume its upward path in March.

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.

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Comments (2)

Today fed and bullion bankers in a hurry to smash all back down. Look like they are so desperate to contain precious metal price
Dr Rick Gold profile picture
Good analysis, thanks. Long USLV and UGLD, doubled up today on the pullback near the lows. Downside risk seems minimal, 20% upside seems reasonable.
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