Gold Price Shines on Uncertainty, Approaching $1,300

Wednesday, August 23, 2017

Anyone paying attention to the price of gold lately has seen the yellow metal stop its pessimism on the year and reverse course, instead heading back to $1,300 with a vengeance. While the stock market makes rocky moves both up and down with uncertain headlines in North Korea and in the domestic political situation, the price of gold has had a chance to show off its quality as a hedge investment that might be better than bonds.

Reviewing the Performance of Gold in Recent Weeks

gold performance chart

At the end of July, gold’s price was holding in the $1,270 per troy ounce range. After a brief dip to start off the month, as the chart from MarketWatch shows, gold took a sudden bounce in the middle of the month—and hasn’t looked back. If anything, gold is approaching the $1,300 mark with even more seriousness than before.

To what can we attribute gold’s increase as of late? Uncertainty in the headlines is a sure bet, especially as a showdown with North Korea appeared inevitable. But as those headlines have cooled, the price of gold has stayed put.

It may be that hedge investors are identifying problems with the current economy that are worth noting, including debt-based assets at a record high. More and more headlines point to a potential correction looming for the market, and even though a broken clock is correct twice per day, it may simply be that investors feel this market is “due.”

The U.S. Dollar Index

There’s another variable that bears watching anytime we see movements like this in gold: the good old U.S. dollar. Regular readers won’t be surprised to find that the U.S. Dollar Index is slightly down in the past month, which is par for the course when it comes to measuring the price of gold. Still, the U.S. dollar has held on to some surprising strength, considering where gold has headed in recent weeks. In fact, when measuring its current status (93), it’s actually ahead of where it was at the end of July.

That tells us that there’s something more to the increase in gold than just the negative correlation gold holds with the U.S. dollar. Perhaps all the talk of market fears has some basis in truth.

Gauging Where Gold Goes from Here

It’s difficult to predict the price of gold—after all, would you have predicted gold’s rise a few weeks ago? But one thing about our current economic climate seems certain: stock market corrections happen, and the stock market is currently high. Though this has been the story about stocks for some years now, it’s simply a case of cause and effect—and, perhaps, inevitability. It turns out that gold’s flirtation with $1,100-per-troy-ounce—at least its upper segment—would have been a good “dip” in which to stock up on the yellow metal.

What’s impossible to tell is whether that trend continues. But for now, it appears August will hold up as a strong month for precious metals that might have an effect on gold’s second half of 2017.  

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Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.