Gold Price Falls As US Dollar Recovers: I See Opportunity!

Tuesday, September 27, 2016

gold bars and gold coins

Gold had a strong move in the market last week…and for good reason. The Federal Reserve kept its interest rates low. This caused immediate declines in the value of the USD, leading to gains in the price of the precious metal. However, the USD is recovering today, and this is leading to a decline in the price of gold. Nonetheless, I see this as an opportunity. Today, we'll talk about why I'm expecting that we're going to see big gains in the price of the precious metal ahead.

OPEC Meeting Isn't Looking Good

The week before last, I recommended purchasing gold at lows to take advantage of gains following the Federal Reserve's interest rate decision. If you followed this recommendation, you probably made a pretty penny. Now, I'm expecting another big Wednesday announcement to lead to more gains in the value of the yellow metal.

At the moment, OPEC and non-OPEC oil producers are in the midst of a meeting. Ultimately, the goal of this meeting is to come to a conclusion that would offer support for price growth, i.e. a much needed change in the crisis-riddled industry.

At the moment, investors are relatively optimistic. Comments made by the Venezuelan President recently led to beliefs that OPEC and non-OPEC producers would finally come to an agreement. However, I don't think things are that simple.

In fact earlier today, we started to see updates from the OPEC meeting. To be sure those updates don't suggest that anything is going to happen at this meeting. In fact the Iranian oil minister specifically said that he doesn't believe that now is the time to make a decision. At the moment, he is listening to the thoughts of other producers, and hoping that something will come down the line. So, it just doesn't seem like an agreement is going to be the result of this week's OPEC meeting. Nonetheless, the meeting will end Wednesday. So, this is when we'll get the news.

What This Has To Do With The Price Of Gold

Gold and oil are two very different commodities. So, looking from the outside in, they may seem like very different topics. However, the truth is that they are very closely correlated. In general oil dictates economic conditions in many regions around the world. If a deal is not made, chances are that the value of oil will fall, leading to further economic hardship in countries like Russia, Saudi Arabia, Iran and others.

Because gold is a safe haven investment, this is great news for gold. Consequently, if oil leads to concerning global economic conditions, it will also likely lead to big gains in the price of gold.

What We Can Expect To See Moving Forward

I maintain my overwhelmingly bullish opinion with regard to what we can expect to see from the price of gold. It is likely we will see headwinds in the mid-term…thanks to US Fed movements as well as improvements in the US economy as well as the UK economy. However, it is expected that poor conditions in the oil market will likely lend a hand to further concerns with regard to the global economy as a whole. This in combination with the Indian wedding season, concerns in Asia and more, will likely lead to further gains in the price of the shiny yellow.

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Where do you think the price of gold is headed? Join the discussion in the comments below! 

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.